September rate cut becomes an if, not when – Rabobank

The Bank of England (BoE) left the policy rate at 5.25%, as expected by almost everyone in the market. Upcoming elections still weigh heavy on the market sentiment, Stefan Koopman, Senior Macro Strategist at Rabobank, notes.

BoE leaves rate unchanged

“The Bank of England’s MPC maintained the policy rate at 5.25%, a decision that was ‘finely balanced’ for some members. The vote concluded with a 7-2 split, in line with expectations.”

“The central bank appears to be preparing the markets for a first rate cut in August, which continues to be our base case. We have, however, removed a subsequent September cut from our forecasts. This follows yesterday’s services inflation data which remains a concern with notable differences of opinion within the MPC.”

“BoE Governor Andrew Bailey didn’t add additional color to this meeting outcome and the pre-election purdah means we will hear nothing from members until after July 4. The Conservatives will pay the price for the surge in inflation and the incoming Labour government is going to take credit for the upcoming rate cuts.”