- Before 4.75%
- Bank rate vote 6-3 vs expected 8-1 (Dhingra, Ramsden, Taylor vote to cut bank rate by 25 bps)
- A gradual approach to the removal of monetary policy restraint remains appropriate
- We cannot guarantee when or by how much we will cut rates in 2025 as economic uncertainty is high
- Consumer price inflation of services has increased
- Domestic inflationary pressures have resolved more slowly
- Most of the UK's near-term activity indicators have declined
- The labor market is generally in balance
- But there is still a lot of uncertainty about its developments, especially wage indicators
- Monetary policy must remain on the constraint for a sufficient period of time so that the risks of inflation returning steadily to the 2% target in the medium term are further out.
- Full statement
The bank level vote is a surprise but well celebrated by Barclays here as an external threat, that has indeed come true. Dhingra, Ramsden, and Taylor believe that “the latest data developments pointed to sluggish demand and a weak labor market, both now and in the year ahead, both of which could see increased pressure down on demand, wages and prices”.
As for the policy statement itself, the main point is largely unchanged as the BOE will stick to a more “gradual” approach in cutting rates going into the next year. But they added this same sentence to the last section:
“The Committee continues to closely monitor the risks to inflation and will assess the extent to which the growing evidence is consistent with tighter supply , which could sustain inflationary pressures, or with weaker demand, which could create additional capacity in the economy and push down inflation.”
In other words, they recognize that there are two-way risks in inflation and that could also see them looking to hold off on cutting rates at some meetings in 2025. For now, they have to they still approach matters on a meeting-by-meeting basis.
The bank level vote split is definitely something that stands out today and weighs a bit on the pound. GBP/USD is down to 1.2605 now from around 1.2630 before the decision. Meanwhile, EUR/GBP is now up 0.3% on the day to 0.8250 currently.
