Traders await the Bank of England’s updated inflation projections and potential shift in voting patterns amid tightening financial conditions.
The Bank of England is poised to keep its Bank Rate steady at 3.75% in its upcoming decision, though a shift in the vote split from 7-2 to 6-3 is possible. Economists suggest Catherine Mann may join Chief Economist Huw Pill and Jonathan Haskel in favoring a hike, citing her recent remarks on financial conditions.
UK yields have risen since the last meeting, while the FTSE 100 hit a record high, complicating the assessment of financial tightness. The statement is expected to retain a non-committal tightening bias, with markets scrutinizing any changes to the phrasing around future action. Updated economic forecasts in the Monetary Policy Report will focus on inflation projections, which were previously lowered to 3.25% for this year.
Recent data showed UK inflation undershooting the BoE’s April forecasts, with subdued wage growth and limited signs of second-round effects. Traders are pricing a 50% chance of a September rate hike, reflecting lingering uncertainty over the policy path.