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Dave Ramsden is the first MPC member to admit rates might need to be cut "quite quickly" in the medium term.
The cuts currently priced-in by markets from late H2 2023 aren't big enough to lower households' interest bill.
But CPI inflation won't be near the target until Q4 2023; pre-election fiscal stimulus will limit the scope for easing.
The MPC currently expects the unemployment rate to remain well below 4% until Q3 2023...
...But timely indicators suggest demand for labour already is cooling, just as supply is starting to recover.
We expect the unemployment rate to rise above 4% before year-end, keeping a lid on wages and rate hikes.
We think that GDP dropped by 1.6% month-to-month in June, almost entirely due to the extra public holiday.
GDP fell by 2.2% in 2002 and 1.7% in 2012; changes in the economy's composition since then won't help much.
Our forecast implies GDP fell by 0.3% q/q in Q2, but this probably won't mark the start of a recession.
The MPC's forecasts signal clearly that markets' medium-term expectations for Bank Rate are too high.
But concerns about persistence in domestic price setting, and looser fiscal policy, will spur further hikes.
We now expect the MPC to raise Bank Rate to 2.00% in September and 2.25% in November, and then to pause.
The effective interest rate on the stock of mortgages rose by only 11bp in H1, but will jump by 30bp in H2...
...and by a further 30bp over the course of 2023, if markets are right about the path for risk-free rates.
Firms still are very exposed to movements in short- rates; the transmission mechanism remains powerful.
House purchase demand is falling quickly in response to the jump in mortgage rates and drop in real incomes.
New mortgage rates look set to rise further in Q3, greatly weighing on approvals.
A contraction in supply, however, will prevent a slump in prices; we still forecast a modest 2% decline in H2 2022.
We have revised up our forecast for Q4 CPI inflation by 1.0pp since early July; energy prices have surged again.
But we have revised down our forecast for the level of GDP by only 0.5pp in Q4; fiscal policy will respond.
People also have shown more willingness to deplete savings; we still expect a recession to be narrowly avoided.
Households saved much less and borrowed more in Q2; real spending, therefore, likely was unchanged from Q1.
On paper, households have ample scope to reduce their saving rate further, but we see several constraints.
Some already have depleted savings, credit conditions are tightening, and deleveraging will be more attractive.
Thursday's rate hike decision is a near-coin toss, but core inflation and unemployment data point to a 25bp hike.
The MPC's new forecasts likely will cast doubt on markets' expectations for substantial further tightening.
Expect the MPC to predict a recession and 5% unemployment in 2023, and sub-2% medium-term inflation.
The U.K. composite PMI in July was above the 50.0 mark, in contrast to the U.S. and the Eurozone.
We think that this strength can be largely explained by the small manufacturing sector and recent fiscal policy.
Ofgem's energy price cap will rise by a further 23% in April, if the recent surge in wholesale prices is sustained.
The BoE is considering active gilt sales that would result in a reduction in the APF of £50B-to-£100B in year one.
This implies active sales of £15B-to-£65B if they begin in Q4; we expect sales at the lower end of that range.
The CBI’s Distributive Trades Survey shows retailers’ stock levels are far too high; discounting will intensify.
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