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VIEW CHANGE: Nomura looks for shallower rate cut path but lower terminal rate

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  • Nomura notes that "while we remain comfortable with our view of an August BoE rate cut , sticky inflation and wages suggest back-to-back cuts are more difficult to justify."
  • It therefore changes its call to look for cuts every other meeting (MPR meetings) until Bank Rate reaches a terminal 3.75% by end-2025.
  • It had previously looked for cuts at each meeting between Aug24 and Feb25 to a higher terminal rate of 4.00%.
  • "We have already seen US and euro area services inflation surprise to the upside in March, so today’s higher UK print was perhaps not a surprise. Coming after yesterday’s stronger wage data this is yet another piece of news raising questions as to how far and how fast the BoE can cut interest rates."
  • "Risks to our new view include on the one hand the possibility that the Bank delays the starting point for rate cuts beyond August (note how markets have repeatedly pushed pricing for the Fed’s first cut further and further into the future since the start of this year), or on the other hand that inflation and wage growth slow sufficiently quickly in the upcoming prints to allow for an eventual swifter easing cycle than we think, once it begins."
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  • Nomura notes that "while we remain comfortable with our view of an August BoE rate cut , sticky inflation and wages suggest back-to-back cuts are more difficult to justify."
  • It therefore changes its call to look for cuts every other meeting (MPR meetings) until Bank Rate reaches a terminal 3.75% by end-2025.
  • It had previously looked for cuts at each meeting between Aug24 and Feb25 to a higher terminal rate of 4.00%.
  • "We have already seen US and euro area services inflation surprise to the upside in March, so today’s higher UK print was perhaps not a surprise. Coming after yesterday’s stronger wage data this is yet another piece of news raising questions as to how far and how fast the BoE can cut interest rates."
  • "Risks to our new view include on the one hand the possibility that the Bank delays the starting point for rate cuts beyond August (note how markets have repeatedly pushed pricing for the Fed’s first cut further and further into the future since the start of this year), or on the other hand that inflation and wage growth slow sufficiently quickly in the upcoming prints to allow for an eventual swifter easing cycle than we think, once it begins."