VIEW: ING: The Bank Of England’s Tightening Cycle May Well Be Over

ING note that “we only get one set of inflation and wage data before the BoE’s November meeting. If there's enough in the recent data to convince the Bank to pause this month, then we suspect the same will be true in November. It looks like wage growth is at a peak. And services inflation should trend downwards over the coming months now that gas prices are so much lower.”

• “We therefore think the Bank will remain on hold for the foreseeable future. We don’t rule out a hike in November, but it will probably require a big upside surprise to either the services inflation or wage data.”
• “Formally, policymakers are telling us that further tightening is possible, and it could well be that the Bank privately wants to take a leaf out of the Fed’s book by “skipping” September’s meeting in a bid to draw out the current tightening cycle. There’s little evidence of that in today’s policy statement, though.”
• “Bigger picture, the Bank has made it abundantly clear that it now thinks the length of time rates stay high is much more important than how high they go in the short term. That’s because the UK mortgage market is heavily fixed, albeit typically for less than five years. Without hiking rates again, the impact of rate hikes will continue to ramp up.”
• “Publicly, the Bank of England has been clear that it won’t be lowering rates any time soon. But in practice, we suspect we could see some initial cuts by the middle of next year, especially given our base case that the Fed and ECB will have begun cutting by that point.”