The chance of a U.K. interest rate cut in the next few months is “severely underpriced”, investment bank Morgan Stanley said on Tuesday, after U.K. jobs market data showed wages growing at their slowest rate since 2022.
“The chances of a 2Q rate cut look severely underpriced to us,” Morgan Stanley said in a research note, adding that the U.K. labour market no longer looked “tight”.
“Our base case remains a May start to the cutting cycle, but we look for firmer BoE guidance next week. In the absence of that, the start of the cutting cycle could slip towards August. We look for 100 basis points of cuts this year,” the bank said.