boe -street views

-Barclays: Expect a 50bp hike at the August meeting with a 7-2 vote as two members prefer a 25b move. Main drivers for the shift to 50bp is are energy prices once again pushing inflation even higher than projected, higher volatility in macro variables has forced other central banks to shed the gradualist narrative, and economic data especially in the labour marker shows a more aggressive approach is needed. They now see another 25bp hike in September before the BoE pauses as the economy slows down by the end of the year. ON QT, they see the launch shortly after the September meeting.

-BoA: Expect 50bp hike to be delivered at this meeting. Reason for the increase in the pace of hikes is the continued increase in the peak inflation level which BoA now sees reaching 12.6% at its peak. With the potential for a fiscal boost to growth, they now see the need to raise their terminal rate by 75bp to 2.75%.

-Citi: Although the market is pricing a near certainty of 50bp, they feel the risk reward is to lean against the market and aim for a 25bp hike. They feel the BoE may not follow the aggressive tightening seen by the ECB, FED and BoC and simply stick to its 25bp per meeting move. On QT, they see the pace set at £3bn/month with the vote on activation likely taking place at the September 15th meeting.

-CS: Expect the BoE to deliver a surprise 25bp hike at the August meeting with 5 voting for 25bp and 4 members voting for 50bp. They see the main reason for the 25bp surprise include core inflation fell for the second month in a row even as headline inflation rose to 9.4% in June, PMI inflation indicators are softening, labour market report showed signs of stabilization and growth risks are increasing. Once again the MPC will also push back against market pricing by showing medium term inflation under shooting their 2 % target. On QT, they see a vote taking place in September with the launch of a £4-£5bn per month sales starting shortly after.

-DB: Expect a 50bp hike at the August meeting since the trigger to act forcefully in response to more persistent inflationary pressure has been met. They expect the vote to be 7-2 with two members opting for a smaller 25bp hike. They also see the MPR showing a hawkist tilt to its forecast with both short term and longer term inflation being revised higher. Growth forecasts for 2023 and 2024 are also likely to be forecasted higher due to fiscal policy and a weaker currency. On QT, they expect the MPC to target £50bn in 2022 and £75bn in 2023, these figures including both passive QT and active QT.

-GS: Expect a rate increase of 50bp at the August meeting with a unanimous vote although some potential for Tenreyro voting for 25bp instead of 50bp. The increase in the pace of hike due to wage growth remaining elevated across sectors while activity monitors still show positive growth momentum. For the MPR, they see modest upward revisions in both growth and inflation forecasts with CPI reaching 12% at the end of 2022. On QT they now see asset sales to proceed at a pace of £15bn per quarter. Corporate bond sales will begin in September as expected while Gilt sales begin in November (or even potentially earlier)

-ING: Expect a rate increase of 50bp at the August meeting although they see the window for further hikes is closing as recession fears increase and supply side pressure show hints of easing. They see the peak in Bank Rates at 2% although they acknowledge the peak could easily reach 2.25% or 2.50%. This is nevertheless lower than the 2.9% discounted by the market.

-Investec: Expect another 50bp hike at the August meeting, the first 50bp hike since the bank has been made independent 25 years ago. The revision higher to peak CPI inflation to above 12% will worry the committee that this could spillover into a more aggressive wage response. On the vote, they see a 7-2 vote for 50bp with 2 members preferring a 25bp move. On QT, they see the August meeting providing some insights on the pace of active QT with implementation likely starting in September.

-JPM: Expect a 50bp hike at the August meeting. Once again see the BoE pushing back against market pricing by showing a large undershoot in inflation in 3 years. For September, they see 25bp although the door will be left open to 50bp at that meeting. O the voting they see a 7-2 vote, with two members voting for a 25bp move. On QT, they see a launch in September which may provide the MPC some flexibility to return to a 25bp pace.

-Lloyds: Although their base case is another 25bp hike in August, they see a strong chance the BoE delivers a 50bp hike which is already almost fully discounted by financial markets. Once again they see the BoE pushing back against Bank Rate peaking around 2.75%-3.00% even as they lift their October inflation forecast to 12%. They see the BoE downgrading growth forecasts for 2022 and 2023 while medium and long term inflation could be lowered below their May forecasts. On QT, they see the MPC voting in September meeting with the likely result of sales beginning in October.

-NWM: Expect a 25bp hike although highlight a clear risk of 50bp. Reasoning behind the 25bp call is they do not see any significant changes to the data since the release of the May projections. They forecast another 25bp hike in November and 25bp in February 2023. They see the risk of recession to dampen any desire for an aggressive policy tightening. On the MPR, short term inflation will be increased but both medium and long term inflation figures may be pushed lower below target in the 2-3 year range.

-Scotia: Lean towards a 50bp hike this week although 25bp is a very strong possibility. The large difficulty in predicting the outcome comes from the recent comments from Governor Bailey himself who originally said that more options that 25bp are on the table for the meeting and then saying 50bp is not locked in. Due to headline inflation climbing again in June to 9.4% yoy, the likelihood is 50bp will be delivered.