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VIEW CHANGE: NatWest Markets: 50bp in August with 6.00% terminal rate

  • “A fundamentally ‘hawkish hike’ in the sense that the strengthened language, notably in the Governor’s statement, seems to suggest a ‘crossing the Rubicon’ moment and a shift in reaction function… it feels as if the BoE is, for the first time during this tightening cycle, occupying the same hawkish terrain as the interest rate markets.”
  • “We now look for +50bp in August to 5.5% and a further rise to a 6.0% peak, either via two +25bp increments in September and November or perhaps a US Fed-style skip in September before a final +50bp in November.”
  • “A harder landing and technical recession now seems the more likely central case.”
  • NWM looks for 25bp cuts in Q3-24 and Q4-24 back to 5.50%.

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