Breakfast Bites - Bank of England remains hawkish

Rise and shine everyone.

The market seemed to not like the Fed meeting at all yesterday. The odds for a March rate cut had declined substantially, yet it would seem that’s what everyone was waiting for. It shouldn’t have come as a surprise to any of our readers though because we’ve been quite firm about no cuts in March.

In fact, after yesterday I have even more conviction that the Fed likely starts cutting in June - July. Chair Powell was quite upbeat about the inflation data, in particular, the last 6 months of good data. He further went on to say that they would like to see about 12 months of good data before they make a decision. That puts us within this time frame of summer cuts. Of course, he said if unemployment or inflation starts to rise, that would change things.

The Bank of England just announced their rate decision with quite a hawkish bias causing the GBP to rise. The BoE maintained the bank rate at 5.25%, in line with expectations, and indicated that more evidence is necessary before considering a reduction in rates. This marks the fourth consecutive hold in the current cycle of tightening monetary policy. (More below)

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