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VIEW CHANGE: TDS look for first cut in August and more gradual cuts

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  • "April inflation surprised materially to the upside... We expect almost all the shock to be persistent, and subsequently revise up our inflation forecast through the rest of this year."
  • "We now look for an August start to the MPC's rate cut cycle, with a more gradual rate of cuts through 2025."
  • TDS now "expect the BoE to cut in August, November, and December 2024. Next year, we look for a quarterly pace of cuts (Feb/May/Aug/Nov) until Bank Rate returns to its long-run nominal neutral rate of 3.00% in 2026H1."
  • Previously TDS had looked for the first cut in June with sequential 25bp cuts Sep24-Feb25 before reverting to a quarterly pace and reaching 3.00% in Q1-26.
  • "In terms of what surprised even our strong services forecast to the upside, it was mainly down to restaurants and cultural services... Part of this strength was probably some payback from the weak March print, but we unwind only a small amount of this surprise in our early May projections."
  • "In terms of cultural services, prices rose by a notable 4.3% m/m (TDS: 2.0%), largely due to a substantial increase in television and radio license fees. Since this is an annual price increase, there is no scope for unwind in this component over the next twelve months."
  • "This pushes up our forecast for headline inflation up by about 0.2ppts over the rest of this year, and our forecast for core inflation by an even stronger 0.25ppts through the year."
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  • "April inflation surprised materially to the upside... We expect almost all the shock to be persistent, and subsequently revise up our inflation forecast through the rest of this year."
  • "We now look for an August start to the MPC's rate cut cycle, with a more gradual rate of cuts through 2025."
  • TDS now "expect the BoE to cut in August, November, and December 2024. Next year, we look for a quarterly pace of cuts (Feb/May/Aug/Nov) until Bank Rate returns to its long-run nominal neutral rate of 3.00% in 2026H1."
  • Previously TDS had looked for the first cut in June with sequential 25bp cuts Sep24-Feb25 before reverting to a quarterly pace and reaching 3.00% in Q1-26.
  • "In terms of what surprised even our strong services forecast to the upside, it was mainly down to restaurants and cultural services... Part of this strength was probably some payback from the weak March print, but we unwind only a small amount of this surprise in our early May projections."
  • "In terms of cultural services, prices rose by a notable 4.3% m/m (TDS: 2.0%), largely due to a substantial increase in television and radio license fees. Since this is an annual price increase, there is no scope for unwind in this component over the next twelve months."
  • "This pushes up our forecast for headline inflation up by about 0.2ppts over the rest of this year, and our forecast for core inflation by an even stronger 0.25ppts through the year."