Zangana adds that the BoE should have scope to cut interest rates from May, as he expects short-term inflation to have decreased sufficiently by then. He adds that the trend rate of growth in the UK economy may also have risen, limiting the inflationary impact of rate cuts.
Investment perspective
Amundi head of multi-asset solutions Francesco Sandrini says the sharp repricing of more cyclical assets as investors anticipate rate cuts is prompting him to explore options in more defensive assets.
He says the latter have underperformed cyclicals for an extended period, but he does not feel this underperformance will continue, principally because so much of the benefit of rate cuts is already priced in.
Mark Jackson, product investment specialist within the multi-asset team at JPMorgan Asset Management, says he expects bonds will be the substantial beneficiary of lower rates as rate cuts would be a sign that inflation is going to be persistently lower, while he anticipates that with “no sign of global recession”, equities would also perform well.
He believes the traditional inverse correlation between bonds and equities will be restored as rates are cut.
David Thorpe is investment editor at FT Adviser
