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You will recall that the Bank of England (BoE) recently cut the Bank Rate by 25 basis points (bps) to 4.50% \u2013 which did not raise too many eyebrows \u2013 and the BoE Governor signalled a \u2018gradual and careful\u2019 approach to easing policy. However, the 7-2 MPC vote split (Monetary Policy Committee) caused a stir. BoE member Catherine Mann \u2013 a known hawk \u2013 joined Swati Dhingra (dove) and voted to cut the Bank Rate by 50 bps.<\/p>\n
The central bank also released updated quarterly projections revealing an upward revision to inflation and weaker GDP, and it forecasted that the Bank Rate would remain higher for longer. Inflation is expected to rise by 2.8% in Q1 25 (versus 2.4% in the previous forecast) and increase by 3.0% in Q1 26 (versus 2.6% in the previous forecast), followed by inflation cooling back to the BoE\u2019s 2.0% target in 2027.<\/p>\n
GDP growth is now expected to grow by 0.4% in Q1 25 (down from 1.4% in the prior forecasts), with economic activity predicted to grow by 1.5% in Q1 26. The BoE also estimates that the Bank Rate will remain around 4.5% in Q1 25 but likely fall to 4.2% in Q1 26, against previous forecasts for 3.7%. Markets are currently pricing another 57 bps worth of cuts this year (little more than two rate cuts).<\/p>\n
UK employment numbers will be released tomorrow at 7:00 am GMT and are expected to show unemployment ticked higher to 4.5% between October to December 2024, up from 4.4% in November. In terms of wages, both regular pay and pay that includes bonuses are forecast to increase by 5.9% on a year-on-year basis (YY), up from 5.6%. However, while market participants will widely watch the jobs report, which can prove market moving, it is essential to remember the validity of the survey\u2019s data remains in question.<\/p>\n
Wednesday welcomes the January CPI inflation data at 7:00 am GMT, which is expected to reveal increasing price pressures across key measures. Headline YY CPI inflation is forecast to increase by 2.8% (from December\u2019s reading of 2.5% [2024]), consistent with the BoE\u2019s updated forecasts. The current estimate range is between a high of 2.9% and a low of 2.4%. YY core CPI inflation \u2013 excluding volatile food, energy, alcohol, and tobacco items \u2013 is estimated to have increased by 3.7%, up from 3.2% in December (estimate range between 3.8% and 3.3%).<\/p>\n
Regarding services inflation, the YY print is anticipated to rise by nearly a whole percentage point to 5.2%, compared to December\u2019s reading of 4.4%. A rise in price pressures, particularly data that meets or exceeds upper estimates, could prompt investors to pare back rate-cut bets this year. This also places the central bank in a somewhat difficult position, given that it not only reduced the Bank Rate last week, but two MPC members also voted for an outsized 50 bp reduction.<\/p>\n<\/div>\n
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[ad_1] BoE: \u2018Gradual and Careful\u2019 Approach You will recall that the Bank of England (BoE) recently cut the Bank Rate by 25 basis points (bps) to 4.50% \u2013 which did not raise too many eyebrows \u2013 and the BoE Governor signalled a \u2018gradual and careful\u2019 approach to easing policy. However, the 7-2 MPC vote split (Monetary Policy Committee) caused a stir. BoE member Catherine Mann \u2013 a known hawk \u2013 joined Swati Dhingra (dove) and voted to cut the Bank Rate by 50 bps. The central bank also released updated quarterly projections revealing an upward revision to inflation and weaker GDP, and it forecasted that the Bank Rate would remain higher for longer. Inflation is expected to rise by 2.8% in Q1 25 (versus 2.4% in the previous forecast) and increase by 3.0% in Q1 26 (versus 2.6% in the previous forecast), followed by inflation cooling back to the BoE\u2019s 2.0% target in 2027. GDP growth is now expected to grow by 0.4% in Q1 25 (down from 1.4% in the prior forecasts), with economic activity predicted to grow by 1.5% in Q1 26. The BoE also estimates that the Bank Rate will remain around 4.5% in Q1 25 but likely fall to 4.2% in Q1 26, against previous forecasts for 3.7%. Markets are currently pricing another 57 bps worth of cuts this year (little more than two rate cuts). UK Employment and Inflation Data Eyed UK employment numbers will be released tomorrow at 7:00 am GMT and are expected to show unemployment ticked higher to 4.5% between October to December 2024, up from 4.4% in November. In terms of wages, both regular pay and pay that includes bonuses are forecast to increase by 5.9% on a year-on-year basis (YY), up from 5.6%. However, while market participants will widely watch the jobs report, which can prove market moving, it is essential to remember the validity of the survey\u2019s data remains in question. Wednesday welcomes the January CPI inflation data at 7:00 am GMT, which is expected to reveal increasing price pressures across key measures. Headline YY CPI inflation is forecast to increase by 2.8% (from December\u2019s reading of 2.5% [2024]), consistent with the BoE\u2019s updated forecasts. The current estimate range is between a high of 2.9% and a low of 2.4%. YY core CPI inflation \u2013 excluding volatile food, energy, alcohol, and tobacco items \u2013 is estimated to have increased by 3.7%, up from 3.2% in December (estimate range between 3.8% and 3.3%). Regarding services inflation, the YY print is anticipated to rise by nearly a whole percentage point to 5.2%, compared to December\u2019s reading of 4.4%. A rise in price pressures, particularly data that meets or exceeds upper estimates, could prompt investors to pare back rate-cut bets this year. This also places the central bank in a somewhat difficult position, given that it not only reduced the Bank Rate last week, but two MPC members also voted for an outsized 50 bp reduction. [ad_2]<\/p>\n","protected":false},"author":1,"featured_media":35175,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[45],"tags":[],"class_list":["post-35174","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financas"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/tiproject.online\/index.php\/wp-json\/wp\/v2\/posts\/35174","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tiproject.online\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tiproject.online\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tiproject.online\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/tiproject.online\/index.php\/wp-json\/wp\/v2\/comments?post=35174"}],"version-history":[{"count":0,"href":"https:\/\/tiproject.online\/index.php\/wp-json\/wp\/v2\/posts\/35174\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tiproject.online\/index.php\/wp-json\/wp\/v2\/media\/35175"}],"wp:attachment":[{"href":"https:\/\/tiproject.online\/index.php\/wp-json\/wp\/v2\/media?parent=35174"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tiproject.online\/index.php\/wp-json\/wp\/v2\/categories?post=35174"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tiproject.online\/index.php\/wp-json\/wp\/v2\/tags?post=35174"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}