VIEW: Nomura: UK Inflation Suggests BoE Done On Tightening

Nomura note that “market pricing highlights how finely balanced tomorrow’s BoE decision now is”

• “When combining today’s downside CPI surprise with the other very obviously weaker data we’ve received since the last MPC meeting it certainly feels like the time is ripe for a pause, and so we find ourselves for second week running (after last week’s upwardly adjusted ECB call) changing our rate call the day before a central bank meeting (to no change tomorrow). We feel we need to adjust this call because of new data.”
• “In looking for no change tomorrow, we expect the Bank will market this as a pause rather than an end to the cycle. That said, we now expect by November the data will have weakened sufficiently to mean that what started out as a pause morphs into end-of-cycle - so that the August 25bp hike will prove to have been the last.”
• “We continue to expect rate cuts only from the second half of 2024, though in the event that this new view proves correct and August was indeed the last hike we may have to bring forward our view of the first cut (currently November 2024) to an earlier meeting (August 2024, for example).”