Economist at UOB Group Lee Sue Ann reviews the latest BoE monetary policy meeting.
Key Takeaways
The Bank of England (BOE) left interest rates unchanged on Thu, ending a series of 14 consecutive rate hikes since Dec 2021, when the Bank Rate was just at 0.10%. The Monetary Policy Committee (MPC) had voted 5-4 in favor of maintaining the policy rate, with four members preferring another 25 bps hike to 5.50%.
The surprise move came after UK inflation printed significantly below expectations for Aug. Headline CPI had fallen further to 6.7% y/y, from 6.8% y/y in Jul, and down from the peak of 11.1% in Oct 2022. Core inflation also fell to 6.2% in Aug from 6.9% in Jul, and against consensus of 6.8%. The decline reflected the easing in both services and core goods price inflation.
Our view is that the BOE will keep all options on the table. Even though there is no meeting in Oct, as well as there being one set of wage (17 Oct) and inflation (18 Oct) data before the next meeting on 2 Nov, which is a little to chew on. Barring any huge upside surprise to services inflation or wage data, we think that given the scale of yesterday’s surprise by the BOE, there is a high chance it will choose to pause again in Nov. As such our base case remains for the Bank Rate to remain at 5.25% for the rest of this year.
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