The Bank of England will keep rates unchanged at 5.25% on Thursday, for the third consecutive meeting. The vote split is expected to remain the same, with six MPC members voting to stand pat on rates while three vote for a hike. This is a statement-only meeting so there are no updated economic forecasts or press conference which could limit the bank’s ability to guide policy.
Recent data saw headline inflation fall sharply with services prices, an important measure for the BoE, slipping below the MPC’s forecast. That said, the figures remain historically high and might stay sticky over the next few months. This week’s encouraging softer wage growth will be welcomed too, with the labour market cooling from an elevated level, though the jobless rate still remains relatively low.
Crucially, inflation still remains some way above the bank’s 2% goal and likely means a tightening bias to the tone of the statement and push back against the dovish rate cut bets which have been priced into the UK curve over the last few weeks. As Governor Bailey recently said, getting inflation to target is now the hard part as a large chunk of the disinflation process was done by falling energy prices.
Sterling has benefited in the last few weeks especially versus the euro, as ECB rate cut speculation ramps up. The statement language should centre around the restrictive stance of the current policy setting needing to remain so for an extended period. Any hints from Bailey and co of policy loosening will see selling in the pound, but it seems too early for that at this stage.
Here are the key numbers to know ahead of the meeting:
