In Between Days (& Headlines)

Research evidence excerpt

In Between Days (& Headlines)

ce: ONS, BoE, Morgan Stanley Research forecasts

We expect an uptick in precautionary savings in 2H.

Exhibit 1 : BoE: Despite most recent volatility,What next? Next week brings May GDP data. We suspect we will be below

oil prices remain close to the most benignconsensus, as we look for another mild contraction in activity, despite a strong retail

assumptions from April MPRsales print in May. Our 2Q growth tracking stands at ~0.2%Q, and thereafter we

continue to model flat activity, with balanced risks around this forecast. 120 Oil Prices, $/bbl

Scenario A Scenario B Brent futures, latest

BoE | Where do we stand? Recent BoE speeches have brought no major change in 110

messaging, we thought. In addition, headline inflation is running at ~40bp below

what the BoE expected back in April, and despite the latest volatility in the

commodity markets, oil futures are tracking the most benign scenario (A) from

April. Household inflation expectations have retreated, and initial newsflow on next

year's pay settlement and public sector pay awards seems encouraging. We struggle 2Q26 3Q26 4Q26 1Q27 2Q27 3Q27 4Q27 1Q28 2Q28 3Q28 4Q28 1Q29 2Q29

to see how all of this results in a meaningful change in tone at the meeting at the Source: Bloomberg, BoE, Morgan Stanley Research

end of the month.

What next? To us, the most interesting question into the July meeting is the format

of the forecasts. On balance, we think that the July MPR will revert to a base case

and two risk scenarios. The base case could look similar to external member Taylor's

Scenario T, while the risk scenarios could perhaps be external member Greene's

preferred Scenario M (higher commodity prices, stronger second-round effects) and