RPT--🏦🇬🇧Cable FX Macro Weekly Note: BoE November Policy Decision

**As seen in Risk In The Week report 10/27/23, subscribe at cablefxm.co.uk/reports

Next Thursday sees the BoE decide on interest rate. Back in September, the central bank held its Bank Rate at 5.25% with an increase vs hold vote split at 4/5. Heading into the decision, August inflation surprised to the downside as the headline accelerated by 6.2% Y/y vs expectations of 6.8%, and services inflation eased. The development sent traders to trim hawkish bets on the BoE to only 50%. However, the central bank is aware that inflation remains well above target and that it will be necessary to keep policy at restrictive levels for 'sufficiently long.' Despite the material downside in price data, the BoE said it is ready to keep tightening if inflation persists. This line is key, as the most recent reading showed prices rising above the survey median. The central bank expects prices to ease to 5.0% this year and to 2.50% in 2024, the forecast seems ambitious as the latest print showed headline CPI at 6.7%. The market implied rates see no change in policy over the short-term, while the 1yr tenor is pricing a rate cut. From a relative perspective, the implied policy is not as dire for the GBP, the BoE is seen delivering 30bps of rate cuts while the ECB is priced to slash policy by 65bps for next year. The desk at Deutsche Bank said that inflation is likely to follow a positive trend in the coming months, they warned that the recent data should not be a reason to change the BoE's stance. Deutsche Bank expects October CPI to fall below 5.0% as the Ofgem Price Cap kicks in. Economists at UBS expressed caution for 2H 2023 and early 2024 growth, they said that the BoE’s window for further tightening is now closed.