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View change: GS now look for 25bp hike at every meeting until Feb23

BOE
  • "The recent jump in headline earnings growth, record low unemployment and elevated job vacancies, suggest that the UK labour market is very tight. In addition, inflation expectations remain very high and are likely to remain above normal levels for the remainder of the year. As a result, we upgrade our wage growth projection to peak at 4.7% in 2022Q3, moderating to around 3.5% by the end of next year."
  • "Given the stronger labour market outlook, we revise up our 2022 core and headline inflation forecasts to 5.5% and 8.6%. While we expect core inflation to have peaked in April, we expect headline inflation to only peak in October at 10.2%yoy."
  • "Given more persistent wage and inflation pressures, we accelerate and revise up our expected path for Bank Rate. We now look for the MPC to undertake a faster hiking cycle, raising Bank Rate by 25bps in back-to-back meetings through February 2023. As such, we have added two more hikes to our path, which boosts the terminal Bank Rate forecast from 2.0% to 2.5%. While the timing of asset sales remains uncertain, we now expect them to begin at the November MPC meeting."
  • "If the BoE staff’s report suggests few obstacles to beginning asset sales, we think the MPC would be willing to potentially begin in September. However, possible delays in agreeing on the asset sales strategy and coordination issues with the Debt Management Office (DMO) could mean that asset sales do not start until 2023Q1."
  • Previously GS had looked for 25bp hike in June 2022, August 2022, November 2022 and May 2023 with risk of a pause if growth disappoints before a 25bp cut in November 2024.
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