© Reuters. HSBC Bank logo is seen in this illustration taken March 12, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
(Reuters) – HSBC (LON:) on Friday said it now expects the Bank of England (BoE) to cut interest rates by 25 basis points in June, versus its earlier expectation of cuts beginning in August.
The BoE on Thursday kept interest rates unchanged, but in its statement signaled it is leaning towards considering cutting interest rates as inflation is slowing.
In addition, two Monetary Policy Committee (MPC) members that had previously voted to hike rates switched to leaving rates where they are, which sent the pound down by around 1% on the day.
Futures markets are now pricing in three rate cuts this year, most likely starting in June. Just two weeks ago, traders were pricing in roughly two cuts in 2024, probably by August.
HSBC maintained its forecast of one rate cut per quarter from August onwards, taking the BoE base rate to 3.50% by the end of 2025.
“We no longer think the Bank will wait until August,” HSBC said in a note.
“There is even a risk of a move in May. After all, the MPC went to the trouble of saying in its statement that it would ‘continue to consider the degree of restrictiveness of policy at each meeting,'” HSBC said.
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