Investment banks have been digesting the implications of Thursday's interest rate decision by the Bank of England.
Goldman Sachs viewed the implications as mixed with the vote split more hawkish than it expected but at the same time more significant changes to the guidance than it had anticipated opening the door to rate cuts at upcoming meetings.
Goldman expects incoming data will confirm that inflationary pressures are easing, giving the Monetary Policy Committee (MPC) the confidence needed to start to lowering Bank Rate in the coming months.
“We stick to our baseline forecast for a first cut in May, although we see the decision to start in May versus June as a close call.”
But Bank of America thinks the market will have to wait until August for the first rate reduction.
It said the vote with 2 members calling for hikes, 6 for a hold, and one for a cut was marginally more hawkish than the 1-7-1 it was expecting.
“And the communication from [BoE governor Andrew] Bailey during the press conference was flawless, with no room for more dovish interpretations,” it added.
“We still expect the BoE to keep the Bank Rate on hold at 5.25% until August, with a cutting cycle of 25bp per quarter from there.“
“The UK will be the last of the major central banks to start and is likely to move more slowly, at least compared with the ECB.”