Barclays boosted its terminal rate prediction to 4.5% after the Bank of England’s eleventh straight rise last week.
Barclays predicted a March BoE stop. However, after a 25 basis point rise to 4.25% and an unexpected inflation jump last week, the British bank reaffirmed its projection for another quarter percentage point hike in May.
After a manufacturing rebound and stronger-than-expected economic growth in January, Barclays raised its UK GDP forecast for the first three quarters of 2023 by 0.1-0.2 percentage points.
Marian Cena of Barclays economists predicted a “moderate recession.” They expect a 0.3% GDP decline in 2023.
After this year’s hikes, Barclays predicts 100 bps of BoE bank rate cuts in the second half of next year, 50 bps more than before. Expect 3.5% next year.
“If the policy attitude remains unchanged, the (monetary policy) committee should know by mid-next year that inflation might fall substantially below goal at the relevant policy horizon. We expect accommodative policy rates “Cena said.
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