BofA notes that the BOE is widely expected to keep the bank rate unchanged today at 4.00%. While labour market conditions have softened, there’s no sign of a sharp deterioration just yet. And that reduces any urgency for aggressive easing action. That especially as the July inflation numbers and risks to prices in the medium-term argue against back-to-back rate cuts.
The firm adds that the central bank should continue to reaffirm a more gradual and careful approach, while emphasising concerns over persistent inflation pressures. As for the more interesting part of the decision today, it could be in the bank rate vote.
In the vote today, BofA expects it to be at 7-2 with Dhingra and Taylor set to dissent by voting for a rate cut. However, they see a risk of Ramsden joining that camp to skew the vote outcome towards being 6-3. Overall, it’s not going to be much of a difference but it certainly keeps things interesting especially after the split in August that required a second round of voting.
Given that there was already some hawkish bias in the August meeting, BofA sees that should also translate somewhat to September amid “slightly higher” inflation. And that should reinforce caution by the central bank in communicating their decision today.
This article was written by Justin Low at investinglive.com.