- Inflation falling to target earlier is good news
- Policy must address any remaining persistence
- Private sector growth is subdued but positive
- The labor market has eased quite significantly
- We should not overinterpret changes to growth outlook in February BoE forecasts
- The latest pay intentions data is good evidence that the disinflation process is intact but not complete
- The latest DMP data on pay and pricing plans are not at entirely comfortable levels
The BoE yesterday surprised with a dovish hold as 4 members dissented for a rate cut versus 2 expected. Moreover, they changed the guidance in the statement from “the bank rate is likely to continue on a gradual downward path” to “the bank rate is likely to be reduced further”. Inflation forecasts were also revised much lower. Lastly, the Agents’ Pay Survey showed wage growth to average 3.4% in 2026 vs 3.5% expected. The market is now pricing 45 bps of easing by year-end with a 49% probability of a rate cut at the upcoming meeting.
This article was written by Giuseppe Dellamotta at investinglive.com.