The latest Bank of England Click here (DMP) is largely in line with the quarterly rate cut narrative that policymakers have stuck by.

While there was good news on wage growth, having dropped to 4% in November from 4.1% in October on a three-month basis, improvements in CPI expectations look to have stalled.

Both the 1-year and 3-year CPI expectations appear to have flatlined at 2.6-2.7%, the latter hovering around these levels since the beginning of the year.
Consequently, with the BoE remaining squarely focused on inflation and particularly services CPI, the DMP survey backs the cautious approach and thus changes very little for the bank’s rate outlook in the short-run.

For sterling, with a slower pace of easing projected for the BoE versus its major counterparts like the ECB, the currency should continue to perform against the euro as the door remains open for a test of 0.82.

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