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Initial take

BOE
  • So overall - 50bp hike (wasn't fully priced), "forceful" remains in the guidance (which wasn't fully expected) - that all seems hawkish.
  • But the CPI forecasts are interesting - 2.53% in 2-years under current rates and 2.00% under market rates - that implies we will see more hikes. But even with constant rates in 3-years time CPI at 1.27% (0.76% under market rates).
  • Overall this seems consistent with leaving the door open for another 50bp in September (although maybe not with an 8-1 vote, and still a chance of 25bp). But then after the MPC's message is that the market is pricing too much.
  • Current market pricing is 43bp for Sep (only a little changed from the 41bp previously), then cumulatively 79bp for November (unch from prior to meeting), 106bp for December (down from 109bp) and 117bp for February for February 2023 (124bp prior). Peak in May 2023 at 125bp (previous peak in March/May 2023 at 129bp priced).
  • We think there is too much priced in the curve from December onwards.
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