Bankinter : The BoE has cut the policy rate by -25bp, as expected, to 4.75%, but sends a slightly more cautious message about the next moves.
Analysis team’s view: Our central scenario pointed to a cut at this meeting. We do not expect any further moves for the rest of the year, especially given the expected pick-up in inflation in the last three months of the year and the level of both services inflation (+4.9% September) and wages (+4.8% August). Following the government’s budget presentation last week we expect a more inflationary environment than previously expected: 2024 +2.2% (vs. +2.5% before); 2025 +2.5% (vs. +2.3% before); 2026 +2.1% (vs. +1.9% before) and an economy growing at a faster pace in the near term: 2024 +1.0% (vs. +0.9% before); 2025 +1.5% (vs. +1.3% before); 2026 +1.8% (unchanged). This reinforces our view of a smoother rate cut cycle than other central banks with three rate cuts of -25bp in 2025 (February, August and November) and two of -25bp in 2026 (February and May), ending at 3.50%.
Elsewhere, yesterday in Sweden the Riksbank cut the benchmark interest rate to 2.75%, in line with previous estimates and 3.25%. It is the fourth reduction since April, when it was at 4.0%. It is the first time it has cut -50bp. It took this decision after achieving inflation control: +1.5% in October (2% b.c. target) and with the objective of reactivating the economy, in a context of GDP contraction (-0.1% year-on-year in 3Q 2024) and fall in Retail Sales and Confidence.
Finally, Norges Bank maintained its key rate at 4.50%. The news comes as no surprise. In fact, it has not cut rates on any occasion. CPI stood at +3.0% in September.
