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BoE Holds, Shows Limited Inflation Worries • The Bank of England (BoE) left its policy rate unchanged at 3.75% this morning, as universally expected. The 6–3 hold-hike vote split was a bit more hawkish than GLOBAL ECONOMICS expectations for a 7–2 breakdown.

• Despite the vote split, today’s announcement took on a slightly more neutral tone FLASH REPORT than anticipated. The BoE highlighted that “there have continued to be clear signs July 30, 2026 of underlying disinflation in recent data” and that there “is little evidence so far to suggest” that second-round effects from higher energy prices are materialising.

• The BoE returned to presenting a central scenario that sees inflation closing 2026 Contributors at 3.2%, then falling to 2.1% at end-2027, with GDP growing by a modest 1.1% each Juan Manuel Herrera year. Director (Mexico) • A trove of data awaits between now and the September decision. The BoE will get Q2 and July GDP, July and August CPI, July and August payrolls, and August PMIs. Markets see about a one-in-three chance of a hike in September.

• At writing, markets are pricing in a total of ~32bps in BoE hikes by year-end, down from ~42bps at yesterday’s local market close. We forecast unchanged rates over the forecast horizon to 2027.

The Bank of England (BoE) left its policy rate unchanged at 3.75% this morning, as universally expected by economists polled by Bloomberg and only fractional rate hike pricing in markets. The 6–3 hold-hike vote split was a bit more hawkish than expectations for a 7–2 breakdown, as Chief Economist Pill and external members Greene and Mann took the hawkish option (the first two also voted for a hike in June).

Despite the vote split, today’s announcement took on a slightly more neutral tone than anticipated across the combination of the BoE’s statement, the minutes to the meeting and the opinions expressed by the Monetary Policy Committee (MPC), updated forecasts and views in the Monetary Policy Report (MPR), and the post-decision press conference with Gov Bailey. At writing, markets are pricing in a total of ~32bps in BoE hikes by year- end, down from ~42bps at yesterday’s local market close.

The BoE highlighted that “there have continued to be clear signs of underlying disinflation in recent data” and that there “is little evidence so far to suggest” that second-round effects from higher energy prices are materialising. In relation to the release of updated forecasts in the MPR, it added that “the risks to the inflation outlook are tilted to the upside relative to the central projection in the July MPR” (partly due to the assumptions window for energy prices not reflecting the most recent moves). It kept guidance unchanged, as “the Committee stands ready to act as necessary” to ensure the convergence of inflation to the 2% target.

In our July forecast update, we removed the two 25bps hikes that we projected the BoE would roll out in 2026. This was on account of a (then) normalization of energy prices and to align with the BoE’s messaging that suggested that economic weakness offset inflationary risks. The latest jump in energy prices (oil and gas) and a return of elevated uncertainty around when the war and its associated disruptions may conclude could now point again to the possibility of tighter policy rates. The current environment of Brent crude oil around $90/bbl and U.K. natural gas around £150p/therm lasting through the next five weeks until the September 17th decision could pressure the BoE into a 25bps hike then.

However, today’s messaging of no evidence of second-round effects and seeing a clear slowing of underlying inflation point to the BoE being content with an unchanged stance. Simply put, it could be too quick of a shift from its current stance to expect them to hike in

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September. On the flip side, a trove of data awaits between now and that decision that could materially shift their perception (on top of whatever happens in energy markets). The BoE will get Q2 and July GDP, July and August CPI, July and August payrolls, and August PMIs, among other data releases…