The "gradual approach" of the Bank of England: Is the market misjudging the pace of interest rate cuts, ultimately resulting in a deeper-than-expected outcome?
The Bank of England is likely to cut interest rates at the meeting on May 8, and the market generally expects that the pace of subsequent cuts will accelerate. However, Analysts believe it is unlikely that the central bank will deviate from its rhythm of cutting rates once a quarter, but the final interest rate may fall below the levels currently anticipated by traders. There is currently a gap between market expectations and reality, as the market has priced in three rate cuts at the Bank of England's next four meetings, which is highly correlated with the Federal Reserve's expected rate cut curve. At the same time, the market expects the Bank of England's interest rate to bottom out at 3.4%, about 100 basis points lower than the current level. Analysts hold a cautious attitude toward both expectations, believing the Bank of England is short.
What the Latest Inflation Data Means for ASX 200 Investors and RBA Interest Rate Cuts
RBA Unlikely to Ease Monetary Policy as Aggressively as Markets Projecting -- Market Talk
The rebound in electricity prices has pushed up the quarterly CPI in Australia, but core inflation has fallen to a three-year low, with the market betting on another rate cut in May.
According to data released by the Australian Bureau of Statistics on Wednesday, the CPI rose by 0.9% in the first quarter, higher than the market forecast of 0.8%. However, the annual inflation rate remained at 2.4%, indicating moderate overall price pressure. The quarterly increase in the 'trimmed mean core inflation,' which is of greater concern to policymakers, was 0.7%, slightly above the expected 0.6%, but the annual rate slowed from 3.3% in the previous quarter to 2.9%, marking the first return to the Reserve Bank of Australia's target range of 2%-3% since the end of 2021. Despite the data being slightly higher than expected, the Australian Dollar rose 0.3% against the US Dollar in the short term, while earlier gains in three-year government bond Futures were reversed.
Australia's Core Inflation Exceeds Expectations, Damping Rate Cut Bets
Slowing Australian Inflation Supports Case for Imminent Rate Cut
