(Bloomberg) -- Traders are pricing 75 basis points of UK interest-rate cuts next year for the first time after a key policy maker hinted the Bank of England won't push back against market pricing.
Swaps tied to policy-meeting dates already show a first quarter-point cut by August, something BOE Chief Economist Huw Pill said ‘doesn't seem totally unreasonable.'
Pill's remarks late Monday, along with the prediction the UK's inflation rate will soon fall into line with that of other developed economies, was the first suggestion officials might be comfortable with the levels swaps are showing.
Traders will be closely watching a speech by Governor Andrew Bailey on Wednesday, when he'll have the chance to back Pill or reject his outlook.
Read More: BOE's Bleak UK Outlook Lifts Bets on Sharp Rate Cuts in 2024
Even at 75 basis points, the scale of easing lags what's expected from the US Federal Reserve and European Central Bank next year. Money markets point to almost a full percentage point from both after they kept rates on hold last month and broadly signaled that policy-tightening was at an end.
“We continue to think that this is still too shallow an easing cycle in 2024” in the UK, wrote Imogen Bachra, head of UK rates strategy at NatWest Markets. She anticipates a percentage point of cuts from the BOE next year.
The BOE's new forecasts released last week show the inflation rate slowing to 4.8% in October as household energy bills fall. That would mark a sharp deceleration from 6.7% in September, but would still be faster than the latest prints seen in the US and eurozone at 3.7% and 2.9%, respectively.
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