BofA Global Research on Bank of England's Decision

On Thursday, BofA Global Research interpreted the Bank of England’s latest decision as having dovish undertones. This perspective is based on the cautious 6-3 vote split and gradual guidance, indicating the potential for rate cuts starting in February 2025.

BofA also noted a shift in the BoE’s labor market assessment from "relatively tight" to "broadly balanced," which reflects a more tempered outlook.

Despite recent increases in inflation and pay growth, the BoE's guidance implies a gradual approach towards rate reductions.

BofA anticipates that the next rate cut will occur in February, with rates decreasing gradually to 3.50% by early 2026.

Market pricing for rate cuts softened after the Bank of England’s decision, although not as much as expected based on the dovish tone of the meeting minutes, according to BofA.

The central bank emphasized its careful approach, underscoring the need for gradual policy adjustments. This decision indicates concerns over persistent domestic inflation and uncertainties regarding economic growth and inflation projections.

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