Bank of England decision narrowly missedPublished at 12:08
Faisal Islam
Economics Editor
The June decision to leave the rate unchanged was expected, and indeed the number of votes in favour of the cuts also remained the same – just two out of nine commissioners – but by a narrow margin.
The committee minutes showed signs of a larger shift in tone and the formation of a majority in favor of the August 1 cuts.
This is new news, especially since members of the rate-setting committee were under press siege for the general election.
The seven members of the committee who voted to keep the rate unchanged are now split between hawks and doves, with the latter believing this month’s decision was a “fine balance.”
Importantly, they downplay indications from the data that services sector inflation remains robust, suggesting that it reflects temporary factors such as increases in the National Living Wage and the prices of services such as broadband and mobile phones that rise automatically with inflation.
As a result, the group, which is believed to include key Bank of England officials, is downplaying the strength of underlying inflationary pressures.
This is enough for a majority to cut rates, but this will be Deputy Governor Ben Broadbent’s last meeting, as he is due to be replaced by Claire Lombardelli in August.
Although not yet finalized, the wording sends a clear signal to markets and the public that a rate cut is most likely to come at the bank’s next interest rate meeting in August, once it completes its new economic forecasts.