Friday, 24 September, 2021
– JPM brings forward its BoE hike path to Q1.
– GS maintain their baseline expectation for the first hike in May 2022, but now see risks skewed in the direction of earlier lift-off.
– Barclays think that BoE comment that ‘any future initial tightening of monetary policy should be implemented by an increase in Bank Rate’ as a highly unlikely outcome
NWM Theo Chapsalis:We have been bearish gilts, running a short 5y5y gilt forward since late July (see here). We close this position for 22bp of profit as we believe that in the near term, longer rates may struggle to sell-off even if we end up 2021 with a higher 10y rates.
Barclays: BoE said “any future initial tightening of monetary policy should be implemented by an increase in Bank Rate, even if that tightening became
JPM: JPM brings forward its BoE hike path to Q1.
Citi: The MPC’s reaction function became another notch more hawkish, revealing most members think a rate hike is possible this year, even while asset purchases continue. Rising unemployment will probably still prevent November hike, but not for long. We now expect a 15bp rate hike in February 2022 and 25bp in May, triggering balance sheet reduction. If unemployment does not increase as much as we expect, the Bank will likely hike in November and reach its terminal rate of 1.25% in early 2024.
MS: MS economists have a more bearish view on furlough windup and growth than the BoE, and so continue to expect liftoff only in August 2022. GBP rallied following the release as markets started to price in the possibility of a 2021 hike. WMS think the hawkish BoE rhetoric, in combination with stronger risk sentiment, should support GBP on the crosses for now
GS: GS expect the MPC to wait until 2022 for its first hike as growth momentum is slowing, there are likely to be some frictions from the furlough unwind, and it will take time to get clarity on the underlying strength of the labour market. Therefore, while GS think next February is a live possibility, they maintain their baseline expectation for the first hike in May 2022, but now see risks skewed in the direction of earlier lift-off.
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