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VIEW CHANGE: JPM Looks For First Cut In August

BOE

JP Morgan bring forward their forecast for the first BOE's rate cut to August (vs November previously) following today's UK CPI data.

  • They characterised today's surprise as "small" and flagged expectations for a likely "backdown again in January" due to seasonal factors.
  • Their end of '25 forecast for the policy rate remains at 3.00%.
  • JPM now forecast a cumulative 75bps of cuts for this year (25bp in 3Q and 50bp in 4Q vs. prev. 50bp in 4Q).
  • Despite "upside surprise in core inflation in December, particularly in services" JPM note the surprise was "concentrated in some of the services components the MPC has argued should be given less weight" and highlight that "this measure is still far below the BoE's November forecast."
  • They expect the MPC to revise down its inflation forecasts "significantly" in February as "lower gas prices now look set to take headline briefly below target from April." Still, they continue to think the MPC will "need more persuasion in order to cut as early as 1H24."
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