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The other side of Table Mountain beckons.

Speaking in Capetown this August, Bank of England Chief Economist Huw Pill suggested that the central bank’s policy path could resemble the broad and flat “Table Mountain” which looms over the southern tip of Africa. Under this scenario, he argued, rates wouldn’t need to climb a lot higher, but might have to remain at elevated levels for a prolonged period to bring inflation risks down.

Thus far, his colleagues have signalled agreement. In contrast with their counterparts at the Federal Reserve – who have acknowledged they could begin cutting in the early new year – British officials have maintained a firmly hawkish bias in recent months, with three of nine Monetary Policy Committee members voting to increase rates at the December meeting, and several warning markets against engaging in a premature loosening in financial conditions.

But we suspect the easing timetable has been moved up, with rates likely to begin coming down quickly by the March policy meeting. Current market pricing – which implies five reductions in 2024 – could prove relatively durable as inflation falls and underlying economic growth remains moribund.

Implied policy rate by Bank of England meeting, %

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