Bank of England: Outsourced policy

We expect the Bank of England to leave Bank Rate unchanged at 3.75% on 30 July. Inflation has fallen more than the MPC anticipated, while easing wage growth and soft activity indicators suggest domestic inflation pressures remain contained. However, higher energy prices following the collapse of the ceasefire have increased upside risks to the inflation outlook and are likely to feature in policy discussions. While some hawkish dissent is expected, Governor Bailey is likely to maintain a cautious wait-and-see approach. Greater clarity on the first Burnham Budget is also a reason to remain on hold. Despite market pricing, we expect rates to remain unchanged through 2026.