BoE Rate Prep

Investment Bank Views

BofA – 13th December
We expect the BoE to keep the bank rate unchanged at 4.75% at its meeting next week. We expect a vote of 8-1 for a hold, with Dhingra voting for a 25 BPS cut. Risks are for a 9-0 vote (given Dhingra last week alluded to favouring a gradual approach to rates). In November the BoE struck a cautious tone, with hawkish upward revisions to its growth and inflation forecasts due to the fiscal easing announced. The language emphasized a gradual approach as well as the need for policy to remain restrictive, consistent with a hold in December and a quarterly cutting path.

JPMorgan – Dec 13th
The BoE should be the least exciting meeting of the week as the market seems happy to sit with its view that they will cut at the next few MPRs. Bailey has vindicated that this is in line with their gradual guidance, as he explicitly mentioned 4 cuts next year as the baseline in a recent speech.

Morgan Stanley – Dec 15th
We expect an 8:1 vote for a hold, with no change in the messaging of gradual cuts. We see the next 25 BPS cut in February 2025.

MUFG – 13th Dec
The BoE is expected to stand pat next week. At the last MPC meeting in November, the BoE lowered the policy rate for the second time in the current easing cycle to 4.75% but provided no indication that they are ready to speed up the current quarterly pace of rate cuts. It leaves February as the next likely MPC meeting for another rate cut.

Rate Expectations From Markets
Traders reduce BoE easing bets and see only a 50% chance of a February cut.

Previous BoE Rate Statement Summary – November 7th
Bailey: It’s likely interest rates will continue to fall gradually if the economy evolves as expected.
BoE forecasts GDP growth in 2024 +1% (August forecast: 1.25%), 2025 1.5% (August: 1%), 2026 1.25% (August: 1.25%), 2027 1.25%, based on market rates.
BoE: A gradual approach to removing policy restraint remains appropriate.

Previous Market Reaction (GBP/USD)