- The Bank of England (BoE) voted 8-0-1 to keep interest rates unchanged, contrary to expectations of a 7-0-2 vote. Only Dhingra dissented, advocating for a 25 basis point rate cut. The bank started its cutting cycle at the beginning of August, lowering the main interest rate to 5.0% from 5.25%
- The BoE emphasized the need to be cautious about cutting rates too quickly or by too much, citing concerns about inflation persistence.
- However, the BoE expects that inflation will rise to around 2.5% in Q4 compared to previous expectations of 2.75%
- There are "range of views" among MPC members who voted to keep rates unchanged regarding the persistence of inflation. Most of the voters believe that the current policy is appropriate
- The BoE will closely monitor inflation persistence and adjust monetary policy restrictiveness accordingly at each meeting.
- The labor market has shown signs of loosening but remains tight by historical standards. However, data quality issues, particularly with the Labor Force Survey (LFS), continue to be a concern.
Following the announcement, the cable exchange rate reached its highest levels since February 2022, reflecting the market's interpretation of the BoE less dovish stance. The market is pricing only 66% probability of another cut in November and before the decision the cut was fully priced.
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