PIMCO: BoE decision will be like a coin toss

30 juli 2024

Rente Centrale bank Verenigd Koninkrijk

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Peder Beck-Friis, Senior Vice President at PIMCO, shares his expectations regarding the BoE's interest rate decision.

He thinks the focus will be on the question whether the BoE decides to implement an interest rate cut or to keep interest rates at the current level (5.25%). In any case, he expects two interest rate cuts by the BoE in 2024 and still sees gilts as attractive.

A summary in bullets:

On Thursday, the Bank of England (BOE) will announce its next policy decision. As the Monetary Policy Committee (MPC) will weigh stronger growth and sticky services inflation against better news on forward-looking inflation signals, the vote will be a very close call on whether they proceed to cut or remain on hold and delay the first cut until September.
Irrespective of the exact timing of the first cut, our broader outlook remains unchanged and we continue expect two rate cuts in 2024. Core inflation is likely to fall ahead as pandemic-related effects fade, policy remains tight, and the labour market rebalances. Comments by Rachel Reeves yesterday show that the new government is strongly committed to fiscal discipline, which reduces upside inflation risks in future years.
We continue to find gilts attractive at current levels.