BoE Statement: Rates kept unchanged at 3.75%, as expected; vote split was 6-3 (exp. 7-2); Greene, Pll and Mann voted for a 25bps hike
COMMENTARY:
- Governor Bailey: Bailey says underlying disinflation remains in train, while the labour market is easing and demand remains soft, holding Bank Rate is appropriate amid more inflationary global conditions and more benign domestic conditions
- Greene: Greene says some second-round effects are likely to emerge and a proactive raise may reduce that probability
- Mann: Mann says Bank Rate should be above 3.75% and a 25bps raise is appropriate
- Pill: Inflation risks lie firmly to the upside and raises concern over lasting catch-up effects in wage and price-setting; raising Bank Rate would signal willingness and ability to address inflation upside risks
A hawkish dissent block of three voting for a hike against a hold is the unusual feature here; on previous occasions when MPC dissents have run against the direction of travel rather than merely the pace of it, the signal has mattered more than the split arithmetic itself, because dissents of this kind have historically been early markers of where the committee's centre of gravity eventually moves. The composition is notable: the dissenters span the external hawk wing and internal members, and internal dissent has tended to carry more informational weight about the Bank's reaction function than external opposition alone. The governor's framing, holding amid disinflation in train domestically but more inflationary global conditions, is the classic staging language of a committee keeping optionality rather than one declaring itself done; such conditional holds have in past cycles preceded moves in either direction depending on which set of conditions resolved first. The transmission runs through the front end of the gilt curve and SONIA strips, with GBP sensitive to whether the hike dissent is read as a live near-term risk or a protest vote. The follow-ons that matter are the minutes' balance of language on second-round wage effects, subsequent speeches from the median voters rather than the named hawks, and the next wage and services inflation prints, which are the data the dissenters explicitly anchored on.