BoE: Expected rate cut next week despite inflation pressures

We anticipate that the Bank of England (BoE) will reduce the Bank Rate by 25 basis points on August 7. We expect that at least five members of the Monetary Policy Committee will support a rate cut. The BoE is likely to maintain its “gradual and cautious” approach, adopting a “meeting by meeting” strategy and a data-dependent approach due to the two-sided risks surrounding the inflation forecast. The B oE is likely to highlight the emergence of labo u r market slack, as evidenced by the decline in the vacancy-to-unemployment ratio - a key indicator of labo u r market tightness - falling below pre-COVID levels and the BoE’s estimated equilibrium rate. The recent decrease in job vacancies, combined with an increase in unemployment, has created a larger pool of available workers to fill open positions , that will weigh on wage growth We also expect the BoE to reduce the pace of QT from £ 100 billion currently to £ 60 billion (including net sales of £ 11 billion) for the next twelve months starting from October 2025 .