BoE left its policy rate unchanged at 4.25% today, as expected. The vote came in at 6–3, with Swati Dhingra, Dave Ramsden, and Alan Taylor opting for a 25bps cut. Known doves Dhingra and Taylor had pushed for a larger 50bps cut at last meeting. A surprise was that Ramsden who aligned with the majority last time and supported the 25bps cut. The voting marked a slight shift toward a more dovish stance.
In its accompanying statement, BoE acknowledged that underlying UK GDP growth has remained weak, and that labor market slack is becoming more evident. Inflation jumped to 3.4% in May, largely as expected. BoE expects inflation to hover around current levels through year-end before gradually falling toward the 2% target in 2026.
The statement also pointed to heightened geopolitical risks, particularly from the Middle East, as a complicating factor for inflation and energy costs. In light of this backdrop, the BoE reaffirmed that its next moves will be “gradual and careful” and emphasized that monetary policy decisions are “not on a pre-set path”.
