Data needs to beat BoE’s forecasts for further rate hikes

This week the Bank of England implied that Bank Rate is at or very close to its peak, and for further rate hikes to happen there needs to be evidence of more persistent inflationary pressures than it expects. We still think rates may rise to 4.50%, although we now think the Bank might get there in two 25bps steps rather than one 50bps increase. Lingering domestic inflationary pressures will probably keep rates at their peak for all of this year, but the good news is that we think the Bank will cut rates in 2024 by more than investors anticipate.