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VIEW CHANGE: BNP looks for first cut in August rather than June

BOE
  • BNP has pushed back its expectation of the first rate cut from June to August and now expects to see 75bp of cuts in 2024 rather than its previous forecast of 100bp. It continues to look for 100bp of cuts in 2025 to 3.50% (previously 3.25%).
  • "March’s UK inflation data, on top of stronger-than-expected pay figures, suggest stickier inflationary pressures than we had previously thought."
  • "We now see services inflation running above 5% y/y through to June and headline inflation to fall below the 2.0% target only in June – a data print that will not be available to the MPC until its August meeting. Finally, we do not see core inflation dropping below the 3.0% threshold until July. In addition, we now expect services prices in April – the timing of many annual price changes – to increase 1.3% m/m, compared with 1.1% m/m in the BoE’s February projections."
  • "There remains the chance that the centrists just go for it in June and cut Bank Rate, but this now looks like the risk rather than a reasonable central case."
  • "It was not all bad news for the BoE. Within headline inflation, the decline was broad based."
  • On core inflation "the details suggest a slightly more worrying take. The decline was largely driven by core goods inflation, which fell to 1.5% y/y from 1.9% y/y as the effects of falling producer prices continued to pass through into prices on the shop shelves. Even then, while soft, there are signs that this disinflationary force is slowing, with momentum in core goods prices picking up gently."
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