BoE: Terminal rate forecast increased from 4.75% to 5% due to upside surprise in UK inflation – Credit Suisse
29.05.2023, 08:03

BoE: Terminal rate forecast increased from 4.75% to 5% due to upside surprise in UK inflation – Credit Suisse

Economists at Credit Suisse have increased their BoE terminal rate forecast to 5% due to the beat in UK inflation.

Mild recession should allow the BoE to pause in August

“We have increased our BoE terminal rate forecast from 4.75% to 5.0%. We now expect two more 25 bps hikes from the BoE (in June and August), compared with one before and no rate cuts in 2023. This is driven by the upside surprise in UK inflation.” 

“We have revised up our 2023 inflation forecast from 7.0% to 7.2% and 2024 inflation forecast from 2.2% to 2.3%. We expect core inflation to remain sticky around the 6.5% mark in H1 2023 (compared with 6.2% before) and fall convincingly only in H2 to close to 5% by end-2023 (with headline inflation falling to 4%).”

“But we expect the BoE to hike rates to less than market pricing (which has peak rates at 5.4%). Our expectation is for headline inflation to continue to fall and for some of the strength in core inflation to reverse in the coming prints. We also expect a mild recession that should allow the BoE to pause in August (earlier than market pricing).”

 

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