On April 19, almost every measure in the UK’s inflation report for March, from headline to core, came in above expectations, suggesting the Bank of England is unlikely to stop tightening.
Clearly, the available evidence suggests that the Bank of England’s base rate of 4.25% has done little to dampen inflation.
Rate traders are now favoring a terminal Bank of England rate of around 4.85%, with a terminal rate of 5% also very likely.
5% may not be the rate the BoE wants, but we note that unlike the US, where the Fed has cut inflation by about 4 percentage points since the start of the tightening cycle, the BoE’s “firefighting” has Nothing works.