BoE—MPC Votes 6 3 to Hold, Notes Little Evidence So Far of Second Round Effects and Reiterates Guidance

Economics Research 30 July 2026 | 2:24PM BST

BoE—MPC Votes 6-3 to Hold, Notes “Little Evidence So Far” of Second-Round Effects and Reiterates Guidance

BOTTOM LINE: The MPC voted 6-3 to hold Bank Rate at the July meeting, with Pill, James Moberly | Greene, and Mann dissenting in favour of a 25bp hike. While the vote split was Goldman Sachs International slightly more hawkish than our 7-2 forecast, the language in the Monetary Policy Sven Jari Stehn Summary placed slightly more emphasis on the softer domestic wage and price data | Goldman Sachs International than anticipated, noting “little evidence so far” of second-round effects. As expected, the guidance language reiterated that the Committee “stands ready to act as necessary” to contain inflationary pressures.

Bank Rate: 3.75%, GS: 3.75%, Consensus: 3.75%, Previous: 3.75%

1. The MPC voted 6-3 to hold Bank Rate at the July meeting, with Pill, Greene, and Mann dissenting in favour of a 25bp hike. The vote split was slightly more hawkish than our forecast and consensus of 7-2. Those who supported the decision suggested tighter financial conditions gave “sufficient insurance” against upside risks, allowing “time to observe further evidence”. The dissenters argued that a “proactive” hike would lower the risk of second-round effects.

2. The Monetary Policy Summary reiterated that the risk of material second-round effects is greater the longer that higher energy prices persist, as expected. But a new sentence added that there is “little evidence so far to suggest such effects” and noted “clear signs of underlying disinflation in the recent data”, thereby placing slightly more emphasis on the softer domestic wage and price data than anticipated.

3. The Bank’s central projection showed headline inflation peaking at 3.2% in Q4, 0.1pp lower than we had expected and 0.5pp lower than in the middle scenario (“scenario B”) from the April MPR. The forecast showed inflation falling to 1.9% at the end of the forecast horizon in 2029Q3, in line with our expectations. The Bank continued to show alternative scenarios based on different assumptions for energy prices and second-round effects. In a milder scenario, inflation peaked at 3% in Q4 and dropped to 1.7% in three years’ time, while a more adverse scenario saw inflation peak at 4.5% in 2027Q2 and remaining above target at 2.4% in 2029Q3. Overall, the Committee judged that risks to the central inflation projection are skewed to the upside.

4. Bailey’s individual paragraph noted “some tentative evidence that inherited inflation persistence may be weaker than had been presumed”. He also noted little evidence of second-round effects, while acknowledging that it is too soon to form strong judgements. In the press conference, he suggested it was a “reasonable

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position” for investors to think that it is most likely that Bank Rate remains unchanged throughout 2026 while requiring a premium to compensate for the risk that Bank Rate may have to rise if inflationary pressure prove more persistent.

5. Going into the meeting, we had seen some uncertainty around Lombardelli and Ramsden’s latest views given limited recent communications. Lombardelli indicated that her vote to hold was not a close call, and her paragraph suggested that there might need to be evidence of risks of “significant” second-round effects for policy to be adjusted. Ramsden did indicate that a hike could be warranted if upside risks to inflation were to crystallise, but also suggested that he would consider lowering Bank Rate if risks subside and disinflation continues.

Sven Jari Stehn Filippo Taddei Alexandre Stott Goldman Sachs International Goldman Sachs International Goldman Sachs Bank Europe SE - Paris Branch

James Moberly Niklas Garnadt Katya Vashkinskaya Goldman Sachs International Goldman Sachs Bank Europe SE Goldman Sachs International

Giovanni Pierdomenico Goldman Sachs International