25bps hike and peak in sight

We think the Bank of England will revert to raising interest rates by 25 basis points (bps), from 5.00% to 5.25%, at the policy meeting on Thursday 3rd August rather than repeating June’s 50bps hike. And while there is probably enough inflationary pressure to prompt another 25bps rate hike at the following meeting in September, to 5.50%, we think that a mild recession and an easing in both wage growth and core inflation will prevent further hikes. When rates are eventually cut in late 2024 and in 2025, we think they will fall further than investors expect.

We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm on Thursday 3rd August. (Register here.)