Prior 4.00%
Bank rate vote 5-4 vs 6-3 expected (Breeden, Ramsden, Dhingra, Taylor voted for 25 bps rate cut)
Prior 7-2
CPI inflation is judged to have peaked
Progress on underlying disinflation continues, supported by the still restrictive stance of monetary policy
The risk from greater inflation persistence has become less pronounced recently, and the risk to medium-term inflation from weaker demand more apparent
Overall, the risks are now more balanced; but more evidence is needed on both
The restrictiveness of monetary policy has fallen as Bank Rate has been reduced
The extent of further reductions will therefore depend on the evolution of the outlook for inflation
If progress on disinflation continues, Bank Rate is likely to continue on a gradual downward path
Most members placed some weight on the scenario that domestic inflationary pressure has faded more quickly than was assumed in the central projection
Greene, Lombardelli, Mann, Pill placed greater weight on risks of persistence in inflation, requiring more prolonged monetary policy restriction
These members were concerned that this could stall, as they placed particular weight on the risk of higher inflation expectations or structural shifts leading to inflation persistence
Bailey judged that overall risks to medium-term inflation had moved down to become more balanced but there was value in waiting for further evidence
Breeden, Ramsden, Dhingra, Taylor dissented in favour of cutting bank rate by 25 bps at this meeting
These members attached a greater weight to downside risks, given that these would reflect a continuation of current trends, with particular concerns that household saving would remain elevated and weigh on consumption
Dhingra and Taylor argued that policy was already significantly over-restrictive
Full statement

Coming into the meeting, traders were pricing in ~32% odds of a 25 bps rate cut. So, that’s a bit of an upset though the bank rate vote shows that the decision this time around was as tight as it could be in favour of holding. Bailey seems to be the one tipping the scales as Greene, Lombardelli, Mann, and Pill are clearly siding with more restrictive policy while Breeden, Ramsden, Dhingra, and Taylor want rate cuts now. And this balance of the scales is likely to play out again in December, so it depends very much on Bailey.

The pound has softened on the decision here but I’m not seeing a great deal of dovishness. They want to wait on more data, which is fine, as recent developments have definitely allowed them the flexibility. However, the big wildcard in the month ahead before the December meeting will be the autumn budget. That will play a key role in dictating the pace of which the BOE might have to move depending on how markets take to the fiscal side of things.

GBP/USD is down to 1.3065 from around 1.3090 earlier, also sticking with a push back after touching the 100-hour moving average of 1.3086.

The groundwork for a December rate cut is laid out but again, not really a given when you look at the balance of voting intentions. Essentially, it’s a case of the BOE can cut if they would like next month but might not necessarily do so. As such, I think a lot will come down to how things play out after the autumn budget instead.