The stickiness of inflation in April has led us to shift back our forecast for the timing of the first interest rate cut from 5.25% from June to August. Even so, our view that CPI inflation will fall from 2.3% in April to below 1.5% by the end of this year is still consistent with interest rates falling to 3.00% next year instead of 4.00-4.25% as investors currently expect. As a result, we think the 10-year gilt yield will fall from 4.35% now to 3.50% by the end of this year.
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