Harry and Meghan never gave their baby a Royal Title
This is a big giveaway that they've been planning to step away from the git-go.
https://www.yahoo.com/news/archie-related-clue-missed-harry-114300626.html
I think you are right in that they plan to "step away". But they can't give their baby a title. That's up to her Majesty. The Queen dispenses the titles. Princess Anne requested that her children, Zarab and Peter, not be given titles. She wanted them to live more normal lives. But the princess (or Princess Royal, as her title is now) hasn't stepped away from her duties. She's just veey low key about it and dislikes publicity.
sharePrincess Anne's children weren't entitled to any titles because she's female - not male. Queen Elizabeth offered to give them titles anyway, but Princess Anne declined.
sharePrincess Anne’s first husband (Mark Phillips) declined the title offered him by the queen, so her children did not have honorary titles like they would have if their father had been a duke or earl.
Children of Princesses of the Blood (like Princess Anne) are not born with royal titles. They aren’t referred to as HRH. They only have titles if their father is titled. If Mark Phillips had accepted a title and become an earl or duke, Zara would have been styled “Lady Zara”
*Princess of the Blood = a daughter of the monarch