Recent Monetary Policy Committee (MPC) communications have just about made a rate cut on Thursday a done deal. The recent equity market turmoil has raised the question of whether the MPC should follow the Fed’s lead and take a more aggressive approach to cutting rates. However, the Committee’s inflation concerns suggest that it will proceed at a fairly gradual pace. We still expect rates eventually to have to fall to around 4%, but they may take their time getting there.
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