MNI BRIEF: BOE MPC's Job Done; 1st Cut Late 2024 - NIESR

The UK's National Institute of Economic and Social Research predicts that growth will stay sluggish in coming quarters and that the Bank of England has done its job in tightening policy to get inflation back on the path down towards the 2.0% inflation target, although its will be late 2025 before the target is hit.

In its quarterly forecast round published Wednesday, NIESR estimated that CPI fell to 5.1% in October, with the BOE penciling in 4.9%, and that it would then only decline gradually to 3.9% by end 2024 and to 2.0% by late 2025. NIESR's view is that the policy rate has peaked at 5.25% and will start to decline at the back end of 2024, a view that is similar to that of the markets BOE Chief Economist Huw Pill who said Monday that while the policy rate was set to remain high for an extended period, it was reasonable to assume that the MPC would reassess this in the middle of next year.

NIESR reckons that the policy rate will settle around 3.25%, markedly below the path, with NIESR's estimate of 'real R*' at 1-1.5%. It predicts sluggish UK growth of 0.6% in 2023 and 0.5% in 2024.