Jan 22 - Morgan Stanley expects the Bank of England to deliver its next interest rate cut in March, scrapping its forecast for a 25-basis-point February cut, after data showed British inflation rose
Morgan Stanley Adjusts BoE Rate Cut Forecast to March Following Inflation Data
Impact of Inflation Data on BoE Rate Decisions
Jan 22 - Morgan Stanley expects the Bank of England to deliver its next interest rate cut in March, scrapping its forecast for a 25-basis-point February cut, after data showed British inflation rose more than expected in December.
Revised Rate Cut Timeline
Following the 25-bps March cut, it expects the central bank to cut 25 bps each in July and November, as opposed to its previous forecast of 25-bps reductions in April and June, the Wall Street brokerage said in a note on Wednesday.
Current Inflation Trends
Data on Wednesday showed headline inflation for December rose for the first time since July, climbing to 3.4%. A Reuters poll of economists had expected inflation to rise to 3.3%.
Market Expectations for Rate Cuts
Morgan Stanley joins UBS Global Research, which also revised its BoE rate cut call to March from February after the data.
Inflation in Britain remains the highest among major developed economies, despite the country's sluggish economic growth.
However, the pace of price increases is expected to slow sharply in the coming months as last year's rises in utility costs and other government-controlled tariffs fall out of the annual comparison.
The BoE's next monetary policy meeting is scheduled on February 5, where the central bank is widely expected to keep rates steady at 3.75%.
Markets are pricing in about 42.33 basis points of cuts by the end of 2026, according to LSEG data.
(Reporting by Kanishka Ajmera in Bengaluru; Editing by Janane Venkatraman)
