BoE to maintain 'gradual and careful' stance – 7-2 split vote for 25bp cut

Matthew Ryan, CFA Ebury

The Bank of England appears certain to slash rates by another 25 basis points this week, as it tries its level best to arrest the dramatic slowdown in Britain’s labour market.

The MPC faces a difficult task, however, as it will need to balance the weakening in the jobs market and the economy on the one hand, with rising inflation on the other.

We are pencilling in a 7-2 vote, with the majority set to vote for a 25bp cut, while a couple of the hawks (likely Mann and Pill), could opt in favour of no change.

We would not be surprised, however, if Dhingra and possibly Taylor voted for a 50bp cut. Aside from the voting pattern, it will be interesting to see what the BoE does with its forward guidance this week.

We think that the “gradual and careful” stance will be maintained, which would signal quarterly cuts ahead. Any tweaking or ditching of this phrase would be significant, and would no doubt be greeted by some sterling selling on Thursday.

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.

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