Nomura expect a +25bps rate hike from Bank of England today, but +50 remains on the table

Nomura preview the Bank of England monetary policy decision due today, Thursday, 3 August 2023. Analysts at the bank say the debate around the Monetary Policy Committee table will be on +25 or +50 basis points, but +25 will win out.

  • With the inflation data having softened, there being more signs of an easing labour market (albeit from very tight levels in the first place) and some key surveys highlighting downside risks to the growth outlook, we think the Bank will be cautious and hike by a quarter point. Aside from the data, BoE guidance and uncertainties about policy lags also favour a 25 bps hike.
  • We expect the discussion among the MPC to be primarily between 25 bps and 50 bps. The latter remains on the table because of above-normal service inflation, strong wage growth and a general view that inflation might prove stickier in the UK than elsewhere. Despite this, we think the stronger justifications for a smaller move will result in a 1-7-1 vote in favour of the decision for 25 bps (one member voting for no change, seven for 25 bps and one for 50 bps).
  • After the August meeting, we expect further 25 bps hikes in September and November for a peak Bank Rate of 5.75%. We ultimately see rate cuts but not until the very end of 2024.

Earlier preview here:

Due at 1100 GMT, which is 0700 US Eastern time:

This article was written by Eamonn Sheridan at Source