The Bank of England kept the bank rate unchanged at 5.25% as expected. Two MPC members voted for a 25bp rate cut, including Deputy Governor Dave Ramsden, while seven members voted to keep rates on hold. The Bank’s updated forecasts see inflation easing to 2% in Q2 before rising somewhat to end the year at 2.6%, slightly lower than their February projections, and assume two rate cuts this year. In his press conference Governor Andrew Bailey stressed that the MPC would be data dependent in its decisions but suggested that markets were underpricing the pace of rate cuts in the coming months. Before the next meeting, the BoE will see two more inflation prints as well as wage growth data for April. The market is now pricing an almost 60% probability of a rate cut in June, up only slightly from 55% ahead of the meeting. A 25bp rate cut is fully priced by August and another 25bp reduction is expected by the end of the year.
The US is set to impose new tariffs on imports from China next week, according to Bloomberg. The tariffs are expected to target strategic sectors such as electric vehicles, batteries and solar cells.
Initial jobless claims rose unexpectedly last week to 231k, up from 209k the week prior and the highest level since August 2023. While the data can be volatile, some Fed officials watch it closely as a real-time indicator of labour market conditions.
Today’s Economic Data and Events
10:00 UK Q1 GDP (preliminary) forecast 0.4% q/q and 0.0% y/y
10:00 UK industrial production (Mar) forecast -0.5% m/m and 0.3% y/y
11:00 Turkey industrial production (Mar) no forecast
18:00 University of Michigan consumer sentiment (May P) forecast 76.2
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