Citi sees UK rates topping out at 4.75%
By Alexander Bueso
Date: Thursday 20 Apr 2023
(Sharecast News) - Economists at Citi reaffirmed its view that interest rates in the UK were more likely than not to peak during the second quarter of 2023 and for a cut in the last three months of the year.
However, following the latest inflation surprise on Thursday morning and the rise in wages reported the day before, they judged that they had been too optimistic on the speed at which rate-setters would be able to pause.
A 50 basis point rate hike still felt unlikely, they said, but at least one more hike was likely with the risks skewed towards another in June.
That would take the terminal rate to 4.75%.
"As with data yesterday, we think the upside surprise here primarily reflects short-lived drivers - including seasonal resilience in core goods.
"Normatively, the best response would we think be patience. But with resolve waning, we expect the committee to remain locked in a backward-looking approach."
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