BOE leaves bank rate unchanged at 5.25%, as expected

  • Prior 5.25%
  • Bank rate vote 7-0-2 vs 7-0-2 expected (Dhingra, Ramsden voted to cut by 25 bps)
  • For some policymakers, decision today was „finely balanced“
  • That is because higher-than-expected services inflation reflected factors that would not push up medium-term inflation
  • Labour market continues to loosen but remains relatively tight by historical standards
  • Key indicators of inflation persistence continue to moderate, but remain elevated
  • Need to be sure inflation will stay low before cutting rates
  • Monetary policy will need to remain restrictive for sufficiently long to return inflation to target
  • BOE remains prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably
  • Will continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole
  • Full statement

The decision is as what you’d expect but there are some subtle dovish hints embedded in the statement. In the forward guidance paragraph, the BOE added this passage:

„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.“

It points to the notion that they are perhaps looking to tee up a rate cut come August, should the data continue on its current trajectory.

Besides that, the other standout point to me is that they are already finding excuses to dismiss the stubbornly high services inflation. In the statement, it is mentioned that:

„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. For these members, the policy decision at this meeting was finely balanced.“

The fact that the decision was more „finely balanced“ means that policymakers are putting a lot of thought in considering the next step i.e. rate cuts already.

GBP/USD is down slightly after the decision here, with the pair down from around 1.2705 to 1.2690 currently.

This article was written by Justin Low at

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