- Prior 1.25%
- Bank rate 9-0* vote vs 9-0 expected (*Tenreyro voted to raise rates by 0.25%)
- Labour market remains tight, domestic cost and price pressures elevated
- Estimates Q2 GDP to fall by 0.2% (June forecast was -0.3%)
- Sees Q3 GDP increasing by 0.4%
- Risks surrounding projections are exceptionally large at present
- Inflationary pressures are nevertheless expected to dissipate over time
- But there is a risk that a longer period of externally generated price inflation will lead to more enduring domestic price and wage pressures
- Policy is not on a pre-set path
- BOE will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response
- Full statement
After a bit of a whipsaw, the pound has fallen on the decision as the BOE takes a page right out of the RBA playbook. In terms of the forward guidance, they added the passage that "policy is not on a pre-set path". As for the inflation outlook, the BOE sees consumer inflation overshooting towards 11% with a staggering peak of 13% in the UK.
On the economy, the BOE views five quarters of negative GDP starting from Q4 2022 - the longest recession period since the global financial crisis. Oof.
All in all, this still reads out more like a one-and-done 50 bps rate hike considering the economic outlook. Cable has fallen down to 1.2095 at the moment.