Created
: 2025.08.04
2025.08.04 23:08
BoE to cut the base rate by 25bps on 7 August, but another split MPC is likely. Divergent signals from the labour market and prices likely to keep the BoE on a quarterly easing schedule. As disinflation resumes, likely in Q4, labour-market loosening should support further cuts to 3.00% in 2026, Standard Chartered's economist Christopher Graham reports.
"We expect the Bank of England (BoE) to deliver a 25bps cut to 4.00% on 7 August, the fifth cut of its monetary easing cycle. The data have been mixed since the Monetary Policy Committee (MPC) kept rates on hold in June. Inflation surprised to the upside in June (3.6% y/y vs Bloomberg consensus of 3.4%); meanwhile, the labour market continues to show signs of loosening, with unemployment rising, vacancies falling, payrolled employment declining (albeit more slowly than previously assumed) and wage growth moderating. With GDP contracting in April and May, and retail sales and industrial production both signalling lacklustre economic activity in Q2, we think there is sufficient evidence for the majority of MPC members to vote for another 25bps cut."
"However, a split MPC seems likely. Given the resurgence in inflation, and the risk of second-order effects, we expect a couple of MPC members vote for a hold; at the same time, persistently weak labour-market data raises the risk of one or two members voting for a 50bps cut. A divided MPC would support our view of a gradual approach to further easing, with the quarterly pace of cuts (in play since the start of the easing cycle) continuing."
"Once the disinflationary process shows clear signs of restarting - likely in Q4 this year - we think labour-market concerns will support ongoing rate cuts in 2026. We therefore maintain our below-consensus view that the base rate will fall to 3.00% by Q3-2026, c.40bps below current market pricing. Governor Bailey is unlikely to commit to a specific path for rates at this week's press conference, citing both inflation and labour-market risks, and the need to monitor incoming data closely. We do not expect material changes to the BoE's economic or inflation forecasts."
Created
: 2025.08.04
Last updated
: 2025.08.04
FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.
We hope you find this article useful. Any comments or suggestions will be greatly appreciated.
We are also looking for writers with extensive experience in forex and crypto to join us.
please contact us at [email protected].
Disclaimer:
All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.
The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.
Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy