Bank of England's Rate Dilemma: A September Hike and the Uncertain Path Ahead
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Bank of England
The Bank of England looks poised to hike rates again in September, but November is less certain. Private sector wage growth is at a cycle high and looks unlikely to slow dramatically by the end of the year, and certainly not before November. Meanwhile, services inflation has risen higher again. And while we think the impact of lower gas prices should start to show through here with a lag, progress is likely to be limited by the time of the November meeting.
That said, the wider economy is showing signs of slowing amid higher interest rates, and the jobs market is also noticeably cooling. We’re likely to see more evidence of this over the next couple of months. We’re erring on the side of a pause in November, but we don’t rule out another hike.
Bigger picture, the BoE is clear that it wants to keep rates high for a prolonged period. We’ve pencilled in the first cut for the second quarter of next year but we acknowledge that may end up being delayed.
