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VIEW CHANGE: RBC still looks for first cut in August but then shallower cutting cycle

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  • RBC continues to look for the first cut in August but rather than 100bp of cuts this year, it now expects 2x25bp cuts in August and November to leave Bank Rate at 4.75% by end-2024. It continues to look for 50bp of cuts in 2025 to leave the terminal rate 50bp higher than previously at 4.25%.
  • "The economy is now recovering earlier and more strongly than expected while the labour market (even after this week’s data) remains relatively tight and wage growth elevated."
  • "Our thinking is that the MPC would seek a (somewhat) higher burden of proof to commence either a hiking or cutting cycle which is why we naturally lean to an MPR meeting (when fresh forecasts are published and a press conference held afterwards) as the starting point for the commencement of a fresh cycle. "
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  • RBC continues to look for the first cut in August but rather than 100bp of cuts this year, it now expects 2x25bp cuts in August and November to leave Bank Rate at 4.75% by end-2024. It continues to look for 50bp of cuts in 2025 to leave the terminal rate 50bp higher than previously at 4.25%.
  • "The economy is now recovering earlier and more strongly than expected while the labour market (even after this week’s data) remains relatively tight and wage growth elevated."
  • "Our thinking is that the MPC would seek a (somewhat) higher burden of proof to commence either a hiking or cutting cycle which is why we naturally lean to an MPR meeting (when fresh forecasts are published and a press conference held afterwards) as the starting point for the commencement of a fresh cycle. "