ICYMI from the Bank of England on Thursday:
- BOE Bailey: Cannot say for sure that any further rate rise will be in smaller steps
- Bank of England Bailey: I'm not saying we're done with rate rises
- BOE's Bailey: Language change reflects a turning of the corner but it is very early days
- BOE's Bailey: We are seeing first signs that inflation has turned the corner
- BOE raises bank rate by 50 bps to 4.00%, as expected
Deutsche Bank analysis, in brief:
- the MPC's overwhelming message today was dovish
- While the Bank stopped short of signalling an end to the hiking cycle, it has instead raised the bar for further rate hikes
- The upshot of today’s decision, forecasts, and guidance is a lower terminal rate projection (4.25% vs 4.5%), with the MPC hiking only once more by 25bps in March. We also now see risks tilted to further (modest) rate increases in H2-23, particularly with our wage growth projections sitting 1pp above the Bank's forecasts, growth likely to prove more resilient in H2-23 than the Bank's projections, and services CPI likely to track above levels consistent with the Bank's mandate for some time. For now, we see a landing zone in sight, with the Bank in touching distance of terminal (4.25%).
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GBP softness has carried into Asia time. EUR & AUD look very similar:
