August back in the picture for the BOE?


There were a couple of dovish hints, subtle of course, put out by the BOE in their rate statement today. Let’s dive straight into it.

Firstly, they introduced this passage to the forward guidance:

„As part of the August forecast round, members of the Committee will consider all of the information available and how this affects the assessment that the risks from inflation persistence are receding.“

Secondly, there are some policymakers looking to already dismiss the ever so stubborn services inflation. The minutes revealed the following:

„The upside news in services price inflation relative to the May Report did not alter significantly the disinflationary trajectory that the economy was on. This view was supported by evidence that the recent strength in services inflation included regulated and indexed components of the basket, and volatile components. Such factors would not push up medium-term inflation.“

And perhaps more importantly, the BOE says that the decision today was „finely balanced“ for some policymakers given the above. The BBC is reporting this applies to three members, which voted for holding rates instead. If you put them on the same side with Dhingra and Ramsden, we might be staring at a 2-0-5 vote in favour of cutting rates in the near future.

In terms of BOE pricing, not much has changed though. The odds for an August rate cut were ~34% coming into the meeting and they are ~43% now. As for total rate cuts this year, traders are now seeing ~49 bps worth of rate cuts as opposed to ~45 bps before.

Well, mark your calendars. The next UK CPI report on 17 July is going to be a big one in determining whether August comes into play.

This article was written by Justin Low at

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