The BoE on Thursday delivered its twelfth consecutive hike, taking its key interest rate to 4.5%, as it seeks to curb the highest inflation of any major economy.
BofA Global Research, which expected a pause next month, now
sees a 25 basis points (bps) increase, lifting its terminal rate
forecast for the BoE to 4.75%.
Morgan Stanley sees risks of wages growing more than the
central bank's forecast and introduced expectations for another
25 bps hike from the BoE in June, which they expect to be the
final tightening of the cycle.
"At market-implied rates, the terminal mean forecast (for inflation) is just at 2% - which can be interpreted as a validation of the Bank Rate peak at 4.75%," Morgan Stanley economists and strategists said in a note.
They expect the BoE to signal a "prolonged" hold in August, and reiterated their expectations for 150 bps worth of cuts in 2024.
BofA, meanwhile, expects only one 25 bps rate cut in the third quarter of 2024, compared to two previously, leaving its end-2024 BoE bank rate forecast at 4.5%.
(Reporting by Roshan Abraham, Priyadarshini Basu and Susan Mathew in Bengaluru; Editing by Sonia Cheema)
