Let’s just take a quick check of things based on the current pricing:
- August – 25 bps rate cut: ~32% (previously ~46%)
- September – 25 bps rate cut: ~80% (previously ~88%)
- Total rate cuts for remainder of 2024: ~44 bps (previously ~48 bps)
The odds of a sooner rate cut have gone down a little despite UK headline annual inflation touching the 2% mark for the first time since 2021. That owes much to the stubborn readings in core prices and more specifically, services inflation. The BOE has previously mentioned that they would like more progress on the latter especially before pivoting.
That said, policymakers did also say that they were comfortable with markets pricing in an August rate cut at the earliest. That isn’t on the table as September remains the favourite now, according to market pricing. So, just be wary of that.
If the next CPI report is softer than estimated, it could just bring August back on the table. But for now, that is a really tall threshold to cross over.