After last week's meeting of the Bank of England, market forecasts show a mixture of opinions on whether to cut the interest rate in June or not.
It is noted that these forecasts are moving towards an interest rate cut later this year, but whether this is done in June or not, this will depend on the upcoming economic data and whether they agree with the Bank of England's forecasts.
In terms of market prices, the first full-fledged reduction of interest rates by 25 basis points will currently take place in August, but the probability of a move in June is currently about 54%, and for the whole year traders are pricing interest rate cuts by about 56 basis points.
A variety of major banks provide their estimates on the interest rate path, so what do these major banks say in light of the Bank of England meeting last week ?
Barclays
- The bank still expects that the first rate cut will be in June, if the data are consistent with the Bank of England's forecasts, and then expect further cuts in August, September and November.
HSBC
- The bank expects the first interest rate cut to be in June, but the bank's vote on the interest rate will be mixed, either 5-4 or 6-3, after which the Bank of England will commit to quarterly cuts up to 4.50% by the end of the year and 3.50% by the end of 2025.
Deutsche Bank
- The bank expected the first interest rate cut to be in June, and then further cuts will follow in September and December.
JP Morgan
- The bank's base case is still the interest rate cut in August at the moment.
ING
- June will be very close, and the first interest rate cut is still expected in August. But it will be the April CPI reading that will decide.
BNP Paribas
- The bank expects the first interest rate cut to be in June with 75 basis points of cuts in 2024. This is to be followed by 100 basis points of cuts in 2025, bringing the bank's interest rate to 3.50%.
It is a mixed set of forecasts with a slight tilt towards June, but in the end it will come down to the next two reports of the UK consumer price index.
The April reading will be released on May 22nd, and this report is especially the most important to look forward to, because the second reading of the May reading will be released only on June 19th, that is, just one day before the meeting of the Bank of England.
And in the end, if the data support the growing likelihood of a slowing economy or low inflation, this could significantly increase the likelihood of a June interest rate cut.
