BOE’s Breeden: Recent evidence further supports case to withdraw policy restrictiveness

This is a notable comments as Breeden voted with the 6-3 majority to keep rates unchanged at 4.75% in December. The market is pricing in a 65% chance of a cut on February 6 but that’s looking too low.

I think one of the better trades of 2025 will be a ‘catch-down’ trade in the pound as rates are cut.

Other comments:

• Difficult to know how quickly to remove restrictive policy
• Some tentative evidence that activity is starting to weaken, though we expect it to pick back up again
• Upside inflation scenario has now subsided sufficiently to no longer be a core consideration in setting policy

The pound hasn’t moved on the comments but has struggled this week as the market sorts out the coming economic weakness and rate cuts.

More:

• We are monitoring what happens in the gilt market
• A lot of gilt price moves reflect global factors
• Gilt market moves have been orderly so far, so far so good

This article was written by Adam Button at www.forexlive.com.