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VIEW CHANGE: Deutsche Bank: 3x25bp likely but "6% no longer looks unattainable"

  • “The MPC has now shown willingness to adjust with the data. Should inflation and labour market data outperform expectations to a similar magnitude as we saw in the last two months, the chances of another 50bps hike will rise.”
  • “The MPC stuck to its long-held forward guidance... Therefore, any slowdown in wage growth or services inflation will warrant a more 'normal' sized hike.”
  • “Risk management considerations are clearly in play... Given significant upside risks to the Bank's inflation forecasts, further tightening will remain likely.”
  • “We now see Bank Rate peaking at 5.75%, with three quarter point hikes in August, September, and November likely. Why not another 50bps hike? We see more downside risks to services inflation in the next print, relative to the Bank's forecast for broadly unchanged services momentum.”
  • “We see the Bank of England potentially having to deliver more – not less – tightening to get inflation back under control. A peak terminal rate of near 6% no longer looks unattainable. But risks of a 2024 recession are very much on the rise. We maintain our call for the first rate cut to come in Q2-24, but now see risks skewed to swifter, more front-loaded, easing cycle.”

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