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VIEW CHANGE: Nomura looks for 5.25% terminal rate

  • "We now see three further 25bp hikes at the next three BoE meetings (Jun, Aug, Sep), bringing the terminal rate to 5.25% – a level that the Bank had pushed back on at the end of last year) . We see few signs of easing in UK inflation that would give the BoE an opportunity to stop hiking sooner rather than later."
  • "We maintain the view that Bank Rate will remain elevated for some time as the BoE seeks to bolster its credibility on reaching its 2% inflation target. Therefore, we only expect rate cuts from the second half of 2024."
  • "Undeniably today’s inflation print was strong, but there were a few April specific factors that mean we are unlikely to see such large monthly increases in seasonally-adjusted inflation again soon."
  • Nomura's previous view was for a final 25bp hike in June 23 but risks "seem skewed to the upside." They then expected 5x25bp cuts in Aug24, Sep24, Nov24, Dec24, Feb25 to 3.50%.

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