BoE is set to cut interest rates by 25bps to 4.00% today, continuing its steady easing cycle that began a year ago. The decision would mark the fifth rate cut since last August. Crucially, today’s announcement will also include updated economic forecasts that could shed light on how far the BoE is willing—or able—to go with further easing.
With UK GDP shrinking in both April and May, the need for additional support is evident. The IMF recently warned that UK economic growth could stall at just 0.1% for both Q3 and Q4, setting the stage for stagflation.
However, inflation remains a concern. Headline CPI rose 3.6% in June—well above the 2% target—and any upward revision in today’s CPI forecasts could tighten the BoE’s policy space. If projections inch toward 4%, it would significantly complicate any aggressive easing path.
The decision is also likely to see a notable division within the Monetary Policy Committee. Hawks like Huw Pill and Catherine Mann may vote to hold rates, while doves such as Swati Dhingra and Alan Taylor could push for a deeper 50bps cut. Even Deputy Governor Dave Ramsden is seen as a potential dovish swing vote. Any unexpected alignment or dissent could shift market pricing for future BoE moves.
Volatility in EUR/GBP is expected with the rate decision. Technically, it is currently extending the rebound from 0.8609 towards 0.8752 resistance. Strong break there will confirm resumption of whole rally from 0.8221 towards 0.8867 fibonacci level. However, break of 0.8678 support will extend the corrective pattern from 0.8752 towards 0.8609 support again.
