At 2.4%, headline inﬂation is not far from the BoE’s 2% target rate, and core inﬂation has slipped lower to 1.9%. Nevertheless, this could still be enough to keep a rate hike in play this month, depending on how the data performs in the meantime. How have the latest data aﬀected the Bank’s inﬂation outlook and interest rate expectations in the longer term?
Key things to watch at this meeting:
- When will the Bank hike? Market expectations are still reasonably high for an August move, if less certain than prior to the latest inﬂation data. Bank of England comments and additional data releases will be key over the next two weeks in shaping those expectations further. For now, an August hike is still a contender.
- MPC vote breakdown: Whether the Bank votes to hike or hold course, what is the vote breakdown? Last meeting, Chief Economist Andy Haldane took markets by surprise when he joined Saunders and McCaﬀerty in calling for a hike. The vote breakdown tells us not just what happened at the latest meeting but what we might expect at the next. McCaﬀerty’s second term expires at the end of August so this marks his ﬁnal meeting.
- Guidance nuance: What guidance does the BoE provide on interest rates heading forward? It has previously indicated that interest rates are likely to move only gradually and to a limited extent.
Next BoE meeting dates: 2 Aug, 13 Sep, 1 Nov, 20 Dec
BoE inﬂation target rate: 2%
(definitions taken/adapted from Investopedia)
Hawkish/hawk: Policymaker who favours higher interest rates to curb inﬂation
Dovish/dove: Policymaker who favours low interest rates to encourage economic growth/inﬂation
The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them.
Inﬂation has recently outpaced wage growth, leading to negative real wage growth.