Synopsis:

Société Générale expects the Bank of England to cut rates by 25bp at next week’s May MPC meeting, citing downside risks to both growth and inflation stemming from recent tariff announcements. Further easing is expected over the course of 2025.

Key Points:

• Base Case: 25bp Cut to 4.25%

  • With key UK data undershooting expectations, and trade policy risks intensifying, SocGen sees a cut as an easy decision.

  • A larger 50bp cut is unlikely due to the uncertain inflation impact from tariffs.

• Growth-Inflation Trade-off Has Shifted

  • Tariffs have tilted the risks clearly to the downside for both growth and inflation.

  • The MPC can afford to begin easing now, particularly with labour market and wage data due in April.

• Outlook for More Cuts in 2025

  • SocGen anticipates at least two more 25bp rate cuts this year.

  • There is now a renewed risk of a more aggressive easing cycle, potentially ramping up in H2 2025 if data weakens further.

Conclusion:

With macro data deteriorating and tariffs adding further headwinds, SocGen sees the May meeting as the beginning of a BoE easing cycle, likely starting with a 25bp cut. Additional cuts are expected, and the risk is skewed toward deeper and faster easing if downside pressures persist.