The Bank of England sprung no surprises, leaving interest rates at 5.25% for the third time in a row and pushing back against the prospect of near-term interest rate cuts. While the recent soft wage and inflation data means the Bank may not wait as long as our forecast of late in 2024 to cut rates, we are still convinced that the Bank will cut rates later than the Fed (Q1 2024) and the ECB (Q2 2024) and current UK market pricing of May. And we still think that when rates are cut, they will be reduced further to 3.00% by the end of 2025 rather than to 3.50% as investors anticipate.
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