BoE’s Breeden
This is a notable comments as Breeden voted with the 6-3 majority to keep rates unchanged at 4.75% in December. The market is pricing in a 65% chance of a cut on February 6 but that’s looking too low.
I think one of the better trades of 2025 will be a ‘catch-down’ trade in the pound as rates are cut.
Other comments:
- Difficult to know how quickly to remove restrictive policy
- Some tentative evidence that activity is starting to weaken, though we expect it to pick back up again
- Upside inflation scenario has now subsided sufficiently to no longer be a core consideration in setting policy
The pound hasn’t moved on the comments but has struggled this week as the market sorts out the coming economic weakness and rate cuts.
More:
- We are monitoring what happens in the gilt market
- A lot of gilt price moves reflect global factors
- Gilt market moves have been orderly so far, so far so good