BoE keeps 'gradual and careful' guidance but further rate cuts 'off the table' for rest of year
Today’s Bank of England announcement has come and gone without too much alarm, with the MPC largely ticking all of the expected boxes. We were not remotely surprised to see the arch doves Dhingra and Taylor again vote for a cut. The pace of quantitative tightening was also slowed roughly in line with expectations, as the bank tries its level best to arrest the worrisome sell-off in long-dated gilts.
In keeping its “gradual and careful” guidance, the MPC has given itself the optionality to lower rates at its next meeting in November.
Yet, with UK inflation still to peak and continuing to print well above the 2% target, we think that this is effectively off the table, and we are not expecting any further cuts from the Bank of England during the remainder of the year.
Sterling is trading sideways following the announcement, which has done little to sway the market’s view on the path for UK rates. With little prospect of any change in the base rate until at least February, we continue to favour upside in the pound against most currencies.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
