08.08.2025 16:15
The Bank of England's recent interest rate decision, while seemingly a 25 basis point cut as anticipated, unveiled a surprising hawkish undertone, according to Commerzbank FX analyst Michael Pfister. This unexpected twist stemmed from an initial deadlock in the voting process, highlighting considerable internal disagreement within the monetary policy committee.
Initially, a split vote emerged: four members favored maintaining rates, another four supported a 25 basis point reduction, and one advocated for a more aggressive 50 basis point cut. Only after a second vote did a slim majority (five members) agree on the smaller reduction, resulting in a less dovish outcome than market projections predicted. This unexpectedly hawkish stance subsequently boosted the pound's value.
Underlying this decision, considerable uncertainty persists regarding the UK's economic trajectory. Persistent inflationary pressures remain a significant concern for policymakers. Reflecting this apprehension, the Bank of England revised its inflation forecast upwards, now projecting 4% inflation by September 2025 – a full two percentage points above its target. Bank of England Governor Andrew Bailey further emphasized this ongoing uncertainty during a subsequent press conference.
Despite the rate cut, further increases seem improbable in the near future. The focus has shifted to the timing of the next potential cut. Given the current economic climate, a September rate cut is highly unlikely, and even a November cut remains questionable should inflation remain stubbornly high. For now, however, this unexpected hawkishness has provided a welcome boost to the British pound. The information was gathered from internet sources.
