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View change: Deutsche Bank: 50bp hikes in both Aug and Sep; 25bp in Nov

BOE
  • “The MPC abandoned any direct forward guidance in June, opting for a more open-ended tightening stance. Importantly, the Bank put markets on notice… The MPC also doubled down on its inflation mandate.”
  • “Inflation and labour market pressures have risen, rather than abated over the near to medium term. Both the Bank's Agents and DMP survey highlighted increasing concerns over rising cost pressures, rising pay, and still extreme recruitment difficulties. The breadth and scale of price pressures have become harder to ignore.”
  • “We now think that the ingredients for larger rate hikes have crystalised, with the broader committee more openly debating the need to go faster in the hiking cycle.”
  • “We now expect the BoE to hike the Bank Rate by 50bps in August and September, ahead of any active QT (which we expect will begin in Q4-2022). Our call is finely balanced, however. Should inflation and labour market trends start to cool by more than we anticipate, the MPC may opt to continue with its 'steady hand' approach.”
  • “We still continue to see the Bank Rate moving into modestly restrictive territory.. with the Bank Rate peaking at 2.5% in November 2022 (previously: Feb-23).”
  • “A pause thereafter remains our base case, as we expect forward looking inflation data to cool, alongside the labour market. Growth fundamentals should also turn more sluggish into year end”
  • “Settling Bank Rate at neutral (1.25% to 2%) may no longer be an adequate response to the current extraordinary inflation wave, particularly given the outsized supply shock grappling the economy.”
  • “We now expect an easing cycle to begin from mid-23 (previously: Q4- 23), with a 100bps of cuts pencilled in over the following year.”
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