Bank of England: Wages, wages and wages

As expected, the Bank of England’s Monetary Policy Committee (MPC) left its policy rate unchanged at 4.25%. The vote split had a little surprise. Deputy Governor Dave Ramsden joined known doves Swati Dhingra and Alan Taylor in voting for a 25bp cut, resulting in a 6-3 split. The minutes highlighted labour market slack. This gives the MPC room to look through above-target inflation. Governor Bailey said the MPC focuses mostly on the domestic economy, not so much geopolitical risks. As such, the MPC reiterated its commitment to gradual and cautious easing. Our base case remains: we expect 25bp rate cuts in August and November, bringing the policy rate to 3.75% by year-end.