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TD Securities: Hike to 1% and gilt sales to begin by May (risk of delay to Aug)

BOE
  • “We now expect hikes at the next two MPC meetings (though there's a risk the second hike slips from May to Aug), followed by a relatively long pause as QT kicks in and the MPC assesses its impact on the economy.”
  • TD Securities’ previous forecast saw hikes in May 2022 and August 2022 (following February).
  • TDS notes that “This is the lowest three-year projected inflation rate since 2011, and alongside rising slack, sends a strong signal that the MPC thinks that markets are pricing in too many hikes over the forecast horizon.”
  • “The emphasis on QT and an unloading of corporate bond holdings from end-2023 suggests much of the further tightening will come via balance sheet policy, somewhat at odds with the MPC's comments last year that Bank Rate remains the primary tool for monetary policy.”
  • “We expect the BoE will provide more guidance on its APF portfolio at the March meeting. Markets will be focusing on their entire thought process and willingness to set the stage for asset sales.”
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