UOB strategists highlight that the Bank of England (BoE) kept its policy rate at 3.75%, with Governor Bailey stressing no move toward a hike despite US-Iran conflict risks. The BoE reiterated it stands ready to act if inflation stays elevated, but softer price pressures led markets to scale back September hike expectations, even as a three-member minority backed a 25 bps increase.

Dovish stance tempers rate hike bets

"The Bank of England (BoE) kept its policy rate unchanged at 3.75%, with Governor Andrew Bailey stating that the committee is not moving closer to a rate hike."

"While the Monetary Policy Committee remains attentive to the inflationary risks stemming from the US-Iran conflict and the possibility of a prolonged escalation, it noted that price pressures have been softer than expected."

"The BoE maintained its guidance that it "stands ready to act" should inflation remain persistently elevated."

"Following the decision, traders reduced expectations of a rate increase at the September meeting."

"Catherine Mann joined Megan Greene and Chief Economist Huw Pill in voting for a 25bps rate hike, while the remaining six members, including Bailey, voted to keep rates unchanged, citing softer inflationary pressures."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)