BoE raises interest rates by 25bps to 4.00% (as expected), in a 8-1 vote (exp. 7 were expected to vote for a hike, 2 were expected to vote for a hold; prev. 3 voted for a hike, and six for a hold), with Mann voting for a larger 50bps rise

• BoE raises Bank Rate by 25 bps to 4%
• Vote split 8-1
• Mann votes for 50 bps rise
• All other members vote for 25 bps rise

• Stronger than expected activity data added to case for tighter monetary policy
• Monetary policy not on a pre-set path
• Bank Rate to be adjusted as necessary to return CPI inflation to 2% target in medium term
• Evidence to be assessed at each meeting

• Still limited evidence of second-round effects from higher energy prices

• GDP growth likely to fall back in coming quarters

• CPI expected to peak at around 5% in Q2 2027 in central scenario
• Adverse scenario shows CPI peaking at 6.2% in Q3 2027
• Central forecast shows CPI at 4.4% in Q1 2027, 3.1% in Q1 2028, 1.9% in Q1 2029 (July: 3.2%, 1.7%, 1.9%)
• Central forecast shows CPI returning to 2% target in Q3 2028 (July: fall below target in Q1 2028)
• Market rates imply Bank Rate at 3.9% in Q4 2026, 4.9% in Q4 2027, 4.9% in Q4 2028, 4.7% in Q4 2029
• GDP growth forecast at 1.6% in 2026, 1.3% in 2027, 1.2% in 2028 (July: 1.1%, 1.1%, 1.7%)
• Q3 headline GDP growth seen at +0.7% q/q (Sept: +0.4%)
• Unemployment rate forecast at 4.8% in 2026, 4.9% in 2027, 5.1% in 2028 (July: 5.0%, 5.3%, 5.2%)
• Private-sector regular wage growth forecast at 3.2% y/y in Q4 2026, 3.5% in Q4 2027, 3.4% in Q4 2028 (July: 3.0%, 3.1%, 3.1%)
• Real post-tax labour income growth forecast at -0.1% in 2026, -0.6% in 2027, 1.0% in 2028 (July: 0.1%, 0.5%, 1.1%)

MARKET-IMPLIED BANK RATE PATH (conditioning assumption)

• Q4 2026: 3.9% (prev. 3.9%); trough
• Q4 2027: 4.9% (prev. 4.2%); peak, held from Q4 2027 to Q4 2028
• Q4 2028: 4.9% (prev. 4.1%)
• Q4 2029: 4.7% (prev. 4.2%)
• Q1 2027: 4.2% (prev. 4.1%)

• Enough inflationary pressure now in pipeline from energy prices to raise rates
• Rate rise should not be seen as first in inevitable long sequence of increases
• Does not seem likely to be last increase unless Middle East conflict resolved
• Some of upward market curve explained by risk premia, not expected rates
• Current restrictiveness broadly appropriate

• 50 bps rise warranted from risk management and credibility perspective
• Economy has crossed estimated threshold into high inflation, tight labour market regime

• Rate rise represents insurance against worse inflation outcomes

• Rate rise represents insurance against worse inflation outcomes

• Additional rate rises will likely be required

• Sees case for further near-term rate rise

• Sees case for further near-term rate rise

• Budget likely to boost demand by 0.1% in 2026-27
• Budget likely to drag on demand by a little over 0.1% by 2029-30
• Budget likely to cut inflation by 0.25 ppts by Q2 2027
• Budget likely to raise inflation by 0.25 ppts a year later as effect unwinds