BOE: VIEWS: Sellside Views on Rate Cycle Given Middle East Events
Mar-04 15:40
- Deutsche Bank: If "market moves to converge back to market assumptions from before the Iran conflict began... expect our baseline to stick with two rate cuts to a terminal rate of 3.25%... should energy prices stick at current levels, we would expect rate cuts to slow... While we would still see Bank Rate settling at 3.25% in such a scenario, we think the final rate cut could slip to as far out as Q4-26... where energy prices push even further, we would expect the next rate cut to come in H2-26. We would also likely see the Bank's terminal rate push higher to 3.5%."
- Morgan Stanley: "Our pre-March base case is for cuts in late March, July and November. But for any cuts to be delivered, risks of Scenario 3 - inflation near 5%Y - need to fade... Timing does matter - if in the coming week there is no sign of operator routing normalising through the Strait of Hormuz, risks of a Scenario 3 would likely still be high enough for the BoE to skip March. We think the hold would be a balanced one. As long as the BoE can plausibly forecast the spike in spot commodity prices reversing, and Scenario 3 risks are out of the picture, we think they can cut. Hence a cut in April, as opposed to March could materialise. We will monitor the developments in the coming days and adjust our call."
- JP Morgan (from Monday): "We are not changing our March call given how fluid the situation is at the moment. But the odds have shifted towards a later cut. We will continue to review this as events unfold. One remaining question is whether the BoE will ultimately end up having to cut more as a consequence of going more slowly."
- Rabobank: "Remove the rate cuts from our 2026 forecast. If the energy market stabilises earlier than we expect, we will re-evaluate." (Rabobank previously expected cuts in March and June).
- Goldman Sachs (see earlier bullet): Now expect cuts in April, July and November (instead of March, June and September).
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