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NatWest Markets: 1.25% Bank Rate by Aug-22 rather than May-23

  • “Now look for +25bp at the next meeting on 17 March to 0.75%, with further +25bp increases in May 2022 to 1.0% and August 2022 to 1.25%. On our forecast, Bank Rate gets to the same end-point (1.25%) but much earlier (May 2023 previously).”
  • “We project the QE gilt stock to stand at £838bn at end-2022 and £803bn at end-2023 – essentially a symbolic move from a monetary policy perspective but perhaps a much more important one ‘politically’”
  • “The BoE’s constant and market rate CPI projections suggest that a 25bp rise in Bank Rate is expected to reduce CPI inflation by 15-20bp 1-2 years down the line. In other words, the projected CPI undershoot of target (~27bp during the final year of the forecast) suggests that the MPC judges that Bank Rate needs to rise to 1-1¼%.”

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