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View change: RBC: 50bp in August; 2.50% Bank Rate by year-end

BOE
  • “The MPC could have been considered as delivering its first ‘hawkish hike’ of the current tightening cycle at [yesterday’s] meeting.”
  • “We would highlight in particular the mention of the ‘scale’ and ‘pace’ of rate rises as well as committing to ‘act forcefully’ as marking a much more aggressive tone from the MPC. It was also significant that the two members who had objected to providing even the limited guidance of the last meeting dropped their objections and seemed comfortable with this iteration.”
  • “We were struck by how much emphasis the minutes placed on the latest Agents’ report which is giving a much more positive take on the economic backdrop than either the official or survey data is at present. Instead the minutes appeared to place more emphasis on upside risks to inflation, particularly from pay growth.”
  • “Having previously seen the MPC raising rates by 25bps in August and pausing thereafter, we now think that the MPC will raise rates by 50bps at its next meeting. We also now think that, the MPC will continue to raise Bank Rate beyond August, albeit by 25bps increments taking Bank Rate to 2.5% by the end of this year.”
  • “The latest labour market data was quite a bit softer than we expected, hence why at this juncture we only see the MPC being able to deliver one 50bps even if we also see the current MPC tightening cycle lasting for longer than previously. At some point growth concerns will return to the fore and limit the policy space for the MPC.”
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