MNI BRIEF: IMF Backs 50-75bps BOE Cuts In 2024
IMF Article IV sees UK inflation sustainably at target in 2025, supports two-or-three cuts this year.
The IMF expects UK inflation to stabilize around target in 2025, but supports the Bank of England beginning to ease monetary policy this year, recommending 50-75 bps cuts in 2024 while backing the MPC's "meeting-by-meeting" approach. However, IMF staff note that any BOE departure from the Fed's policy path will put pressure on the markets. (see MNI POLICY: BOE's New Dove Ramsden Often Leading Indicator)
Other issues raised by the IMF in its latest relatively upbeat Article IV release include the challenge to the MPC's quantitative tightening approach, as it said at the current rate of asset sales the balance sheet could be in touching distance of its 'steady-state' by the second half of 2025.
The IMF said that fiscal transfers between the Treasury and the BOE, which covered QE gains and QT losses, should be "reduced to insulate the BoE from any political pressure," with IMF staff concerned that while the QE/QT program is justifiable current losses are fueling political concerns which could crimp the BOE's scope for action in future.