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Summary: "Too early" to signal cuts, but direction of travel seems clear

BOE
  • The BOE presser is over. There were no notable change in tone from the statement/Minutes/MPR.
  • The key phrase continually repeated by Bailey was that we have changed the question from how restrictive do rates needs to be, to how long do they need to remain restrictive for?
  • Expect to see that phrase in further BOE communication down the line.
  • There's no commitment to cutting rates soon here - but they did note if rates remain constant inflation would be sustainably below target in their forecasts.
  • So the tightening bias is gone, the BOE says its too early to say cuts are coming, but reading between the lines they are not pushing back too hard noting that their forecasts are conditional and that each meeting is always "in play".
  • They also noted that due to the market curve being lower, only around 30% of the impact of past tightening is still to pass through to the real economy, down from around 50% in November.
  • They also are not explicitly endorsing the market curve - noting that inflation remains above 2% for longer than in the November forecasts.
  • However, all in all, the direction of travel is clear.
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