Bank of England Keeps the Rate Steady While Election Storm Brews
In a move that was on the noses of markets yesterday, the Monetary Policy Committee (MPC) decided to keep the Bank Rate unchanged for the seventh straight meeting. If you thought that might surprise anyone, think again—the markets had already priced in a hold long before the big news drop.
The split vote was a familiar 7‑to‑2, with Dhingra and Ramsden pushing for a 25‑basis‑point cut right off the bat. The rest of the committee stuck to their guns, confident that we’re still in the “fine‑balance” territory where a future cut feels like a possibility, not a certainty.
What’s the Deal?
The policy statement? A near‑word‑for‑word replica of the one issued in May. The humor here is that the BoE is as fan‑friendly about its policy dance as we are about a good pun.
- Inflation’s rally back to the 2% target. Headline numbers slid into the sweet spot last month for the first time since mid‑2021, which is basically the warm‑fuzzy feeling of a kid hearing their birthday wishes come true.
- Services prices still sucking. The services CPI is racking up at 5.7% YoY—well above the 5.3% the Bank had predicted. Think of it like a stubborn ketchup stain that refuses to wash off.
- Earnings growth holding steady. Whilst the earnings are dancing close to a 6% YoY climb, the committee wonders if the heat from those numbers might keep the rate in place for now.
Why Hold Steady?
The decision came two weeks before the “snap” general election. In political land, timing is everything. The MPC, with a telling line that politics are “not relevant”, still felt that a conservative approach is the safest bet amid a turbulence-filled political climate.
Will the next move be a cut? Most likely, yes—probably at the August meeting if the disinflation story keeps unfolding nicely and June’s CPI doesn’t throw a wrench in the gears.
- The hawks are still on edge. They watch earning pressures and sticky service prices like a hawk hovering over a field.
- Gradual easing is in the cards. Once that first cut falls, the committee expects just another 25‑basis‑point cut in November, setting the stage for a smooth transition into 2024.
From a marketer’s view, that milder pace equates the BoE’s policy curve to its G10 peers, giving the pound a decent shield against any long‑term headwinds—at least from a policy perspective.
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