European Economics Analyst BoE Preview—More Time to Assess

Economics Research 24 July 2026 | 2:33PM BST

BoE Preview—More Time to Assess

n Wholesale oil and gas prices have risen significantly in recent weeks. But the MPC James Moberly | will likely feel that it has more time to assess the impact of renewed energy price Goldman Sachs International pressures given softer incoming wage and inflation data and tightening financial Sven Jari Stehn conditions. We consequently expect the Committee to hold Bank Rate at next | Goldman Sachs International week’s (July 30) meeting. A 7-2 vote split looks most likely, though we see risks of further dissents. n The updated projections will probably show a slightly lower peak in inflation, reflecting weaker recent data and limited changes in the energy price assumptions compared to the April forecast round. We expect the medium-term forecast to show a slight undershoot given a higher conditioning path for Bank Rate. Given those projections, the Bank’s policy simulations should show slightly less tightening than in April. n We expect the communications to acknowledge that the latest energy price movements increase upside risks to the inflation outlook while also noting softer recent inflation data and continued labour market weakness. The guidance will likely reiterate that the MPC stands ready to act as necessary to return inflation to target, while refraining from giving a strong steer on the upcoming meetings. n Looking ahead, we continue to think that the Bank will probably remain on hold this year if oil prices fall back in line with our strategists’ forecasts. That said, risks to our baseline have increased, and the MPC could well be persuaded to tighten policy if energy price pressures continue to build or signs of notable second-round effects emerge. Even so, current market pricing – which implies almost three hikes – looks too high.

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Goldman Sachs European Economics Analyst

BoE Preview—More Time to Assess

Energy prices have risen significantly in recent weeks. Front-month crude oil prices have increased roughly 40% since early July, although they remain below peak levels. Natural gas prices have risen sharply back to highs seen in late March.

Exhibit 1: A Renewed Surge in Energy Prices

Source: Goldman Sachs Global Investment Research, Bloomberg

At the same time, the inflation data have continued to point to limited indirect and second-round effects from the energy price shock so far. The latest data showed headline inflation continuing to run roughly 40bp below the MPC’s forecast, with food prices significantly undershooting expectations. Pay growth is tracking below the MPC’s estimate for Q2, and survey data from the Decision Maker Panel continue to show little change in firms’ wage growth expectations.

Exhibit 2: Wage Growth and Inflation Continue to Track Below the Bank’s Estimates

Source: Goldman Sachs Global Investment Research, Haver Analytics, Bank of England

It is true that GDP growth looks set to exceed the BoE’s estimate for Q2, while the