• Prior 5.00%
• Bank rate vote 8-0-1 vs 7-0-2 expected (only Dhingra dissented, wanting to cut by 25 bps)
• Need to be careful not to cut rates too fast or by too much
• Most MPC members think in the absence of material developments, a gradual approach to removing policy restraint would be warranted
• Labour market continued to loosen but that it remained tight by historical standards
• But data quality issues continued to be an area of concern i.e. LFS
• „Range of views“ on inflation persistence among those who voted to keep rates unchanged
• Despite that, the current policy stance was judged to be appropriate
• Monetary policy will need to continue to remain restrictive for sufficiently long
• To monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting
• Full statement

Cable has moved up to its highest levels since February 2022, nudging just above 1.3300 currently. The takeaway from the BOE is that they continue to have worries about inflation and that they are quite comfortable in moving slowly to remove the degree of policy restriction.

The key wording that „monetary policy will need to continue to remain restrictive for sufficiently long“ has not been removed.

Traders had previously ascribed to thinking that the BOE will pause today before cutting again in November. But the odds of that are now at ~63%. So, it isn’t quite set in stone now. Traders had previously fully priced in a 25 bps rate cut for November.

If UK inflation data in September comes in similarly to what we saw yesterday here, there will be growing suggestions that the BOE might have to stay on the sidelines again.

This article was written by Justin Low at www.forexlive.com.