Light Rally As Pill Flags Likely Summer Cut Considerations

BoE chief economist Pill turns a little more explicit as he suggests that a rate cut is likely to come under consideration in the summer.

• Although this isn’t out of line with market pricing seen ahead of the comments, we remind that Pill had been one of the more hawkish voices on the MPC before his prior switch to a more centrist footing.
• He has pointed to more work to do in the fight against inflation, although has once again stressed that rates would still be restrictive after a cut.
• Pill also reiterates the risk of too swift a move away from restrictive policy settings.
• His mention of "summer" is deemed to marginally reduce the hurdle to a June cut.
• Dovish moves in BoE-dated OIS on the follow, with ~13.5bp of cuts now priced through June vs. ~12.5bp pre-Pill and 58bp priced through year end vs. ~55bp pre-Pill.
• SONIA contracts last 0.25 to +2.5
• Gilts break the very early narrow ranges although remain comfortably within the boundaries seen in recent sessions.
• Futures last +24 at 97.87, with Friday’s high (98.29) presenting initial resistance.
• Gilt yields are 3-4bp lower across the curve.