Pantheon Macroeconomics

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U.K. Publications

Below is a list of our U.K. Publications for the last 6 months. If you are looking for reports older than 6 months please email info@pantheonmacro.com, or contact your account rep

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q2 Monetary Policy

20 May 2022 The Start of a More Protracted Slowdown for House Price Growth?

Year-over-year growth in the official measure of house prices fell to 9.8% in March, from 11.3% in February.

Surging mortgage rates and falling real disposable incomes will cause house price growth to slow further.

We expect house prices to level off in H2, leaving the year-over-year rate at around 5% at the end of 2022.

Gabriella DickensU.K.

18 May 2022 The Latest Wage Growth Figures Won't Make the MPC Panic

  • Average wages in Q1 were boosted by bonuses; ex-bonus growth has merely matched the MPC’s forecast. 
  • The sharp rise in average hours has boosted weekly wages too; underlying pay pressures are manageable.
  • We expect the labour market to stop tightening soon, as both the participation rate and immigration rise.

Samuel Tombs (UK Economist)U.K.

17 May 2022 The Trade Deficit will Remain Large, Casting a Shadow Over Sterling

The trade deficit, excluding erratics, jumped to a recordhigh in March, largely due to the surge in energy prices.

High energy prices, surging imports of travel services and weak export growth will keep the deficit wide.

Governor Bailey is showing no signs of buckling to pressure from MPs for faster rate hikes to tame inflation.

Samuel Tombs (UK Economist)U.K.

6 May 2022 New Forecasts Imply the MPC Intends Only One-to-Two More 25bp Hikes

At least two MPC members now think Bank Rate does not need to rise any further in the near term.

The MPC’s three-year ahead forecast for inflation, based on market rates, is its lowest for over 13 years.

Markets’ rate expectations fell yesterday, but they still look too high in light of the MPC's new projections.

Samuel Tombs (UK Economist)U.K.

UK Datanote: U.K. MPC Decision, Minutes & Monetary Policy Report, May

  • In one line: Still signalling a much smaller further rise in Bank Rate than markets expect.

Samuel Tombs (UK Economist)U.K.

3 May 2022 Forecast Review, The Near-Term Outlook for GDP Has Worsened

The near-term outlook for households' real disposable income looks bleak; we still expect GDP to drop in Q2.

A recession, however, isn't our base case; people have ample scope to draw on savings and to borrow more.

We now Bank Rate to top out at 1.25% this year, not 1.00%, but still think markets have lost the plot.

Samuel Tombs (UK Economist)U.K.

29 Apr 2022 The MPC will Wait Until August to Publish its Plans for Gilt Sales

Active QT likely will have a much smaller proportionate impact than QE, but the MPC still will be cautious.

The gilt market is less liquid than usual, and the MPC wants a steady programme that won't need tinkering.

We still think the BoE will wait until August to set out plans for sales of £10B per quarter, starting in Q4.

Samuel Tombs (UK Economist)U.K.

25 Apr 2022 Consumers Must Draw on Savings Soon for a Recession to be Averted

March's retail sales figures were a wake-up call for investors; households are struggling to tread water.

Consumers' confidence weakened further in April and now is only a touch above its all-time low.

We still expect a recession to be avoided, but the risk will weigh on the MPC's forthcoming decisions.

Samuel Tombs (UK Economist)U.K.

14 Apr 2022 CPI Inflation will Fall Next Year Almost as Sharply as it Has Climbed

We look for two further 25bp increases in Bank Rate this year, not one, after March's jump in CPI inflation.

CPI inflation looks set to peak at about 9% in April and remain above 8% until the very end of this year.

But energy and core goods inflation will plunge next year; the MPC needn't be as active as markets expect.

Samuel Tombs (UK Economist)U.K.

18 Mar 2022 Markets Likely to be Caught on the Hop Again by the MPC's Dovishness

  • Markets' rate expectations fell sharply in response to the crumbling of hawkish dissent on the Committee.
  • The MPC now is more worried about the impact of high inflation on demand than on inflation expectations.
  • We continue to expect the MPC to stop hiking this year once Bank Rate has reached 1%.

Samuel Tombs (UK Economist)U.K.

10 Mar 2022 The MPC will Hike Bank Rate Again Next Week, but Strike a Cautious Tone

  • Markets are more stressed and consumers' confidence is lower than when the MPC has hiked rates before...
  • ...But with Q1 GDP looking better than feared and inflation set to soar, a 25bp rate rise next week is very likely.
  • A 50bp hike is possible if Friday's inflation expectations data are scary, but the MPC won't want to shock now.

Samuel Tombs (UK Economist)U.K.

14 Feb 2022 The Near-Complete Recovery in GDP Masks Private Sector Weakness

  • U.K. GDP nearly reached its pre-Covid level in Q4, but the recovery still underwhelms by G7 standards.
  • The recovery also has been flattered by huge public spending; private sector GDP was 3.4% below its peak.
  • Exports remain the economy's Achilles heel; they have underperformed since Q1 2021, largely due to Brexit.

Samuel Tombs (UK Economist)U.K.

11 Feb 2022 Mortgage Rates will Rise Further, Slowing the Housing Market

  • The average rate for a two-year fixed rate mortgage, with a 75% LTV ratio, likely will leap to 2.1%, from 1.6%.
  • This increase won't be a problem for most refinancers, but it will impact affordability for new homebuyers.
  • Next week's labour market data will show Q4's small drop in employment is on course to be reversed in Q1.

Samuel Tombs and Gabriella DickensU.K.

7 Feb 2022 Forecast Review: Two More Rate Hikes and the MPC Will be Done

  • We have revised up our forecast for CPI inflation again, and now expect it to peak at 7.5% in April.
  • The squeeze on real incomes is set to be intense, though savings depletion should support spending.
  • We now expect the MPC to hike Bank Rate to 0.75% in March and 1.0% in May, but then to go no further.

Samuel Tombs (UK Economist)U.K.

UK Datanote: U.K. MPC Decision, Minutes & Monetary Policy Report, February

  • In one line: Hiking as expected, but pushing back against expectations of substantial tightening ahead.

Samuel Tombs (UK Economist)U.K.

4 Feb 2022 MPC to Markets: Don't Get Carried Away

  • Investors think the MPC will hike Bank Rate by a further 100bp this year, leaving it at 1.5% by year-end.
  • But the MPC still expects only "modest" further hikes; Bailey was clear: "do not get carried away".
  • The MPC's forecasts for CPI inflation imply rates need to rise only 35bp more to return it to the 2% target.

Samuel Tombs and Gabriella DickensU.K.

28 Jan 2022 Will the MPC Endorse the Upward Shift in the Market Rate Curve?

  • The MPC likely will hike Bank Rate next week, but the 95% probability priced-in by markets looks too high.
  • The MPC warned in November that spare capacity would emerge if rates rose as far as markets expected…
  • ...The curve is up 30bp since, with no cause for greater medium-term optimism; beware another dovish nudge.

Samuel Tombs (UK Economist)U.K.

27 Jan 2022 To Reinvest or not to Reinvest: the £25B Question

  • The MPC's likely decision next week to raise Bank Rate to 0.50% should mark the end of QE reinvestments.
  • The APF will shrink by £25B in March; fallout, however, will be limited, as markets have known for some time.
  • Our working assumption remains the BoE will sell £10B of gilts per quarter when Bank Rate reaches 1%.

Samuel Tombs (UK Economist)U.K.

20 Jan 2022 The MPC will React Immediately to December's Blowout CPI Figure

  • We are bringing forward our forecast for the next two increases in Bank Rate, following December's CPI data.
  • While food, energy and goods prices are mainly to blame for high inflation, services inflation has risen too.
  • CPI inflation, however, will fall sharply in H2 and should be below target in 2023, curtailing the hiking cycle.

Samuel Tombs (UK Economist)U.K.

14 Jan 2022 CPI inflation Likely was Stable in December, to the MPC's Relief

  • CPI inflation probably was unchanged at 5.1% in December, giving the MPC some breathing space.
  • Pick-ups in food and used car price inflation likely were offset by falls in the tobacco and clothing components.
  • The seasonal surge in plane ticket prices will boost the CPI less than usual, because its weight has shrunk.

Samuel Tombs (UK Economist)U.K.

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