Bank of England: The courage to act?

We expect the Bank of England’s Monetary Policy Committee to keep the policy rate unchanged at 4.25% at next week’s meeting, a move that is fully priced in and in line with market consensus. Although April’s inflation data came in higher than expected, the surprise was primarily driven by non-market components. At the same time, labour market indicators for April and May pointed to ongoing softness. While the MPC remains divided, there is little impetus to alter its current guidance of “gradual but careful” rate cuts. We continue to forecast a 25 basis point rate cut in August, followed by another reduction in November.