STATEMENT: BoE holds rates at 3.75%, as expected; vote split 5-4 (exp. 7-2; Breeden, Dhingra, Taylor, Ramsden vote for cut to 3.5%)

VOTE:

• Bank of England holds key interest rate at 3.75% in 5-4 vote
• Dhingra, Taylor, Ramsden, Breeden wanted cut to 3.5%
• Judgements on further easing ‘will become closer call’
• Slowing easing would provide space to assess neutral rate

GUIDANCE:

• BoE says interest rates ‘likely to be reduced further’

ECONOMY:

• BOE says risk of inflation persistence now ‘less pronounced’
• Sees potential for modest pickup in UK productivity

FORECASTS:

• BoE sees inflation at 1.8% in 1Q 2028, 2% in 1Q 2029
• BoE lowers its inflation forecasts for the next three years
• BoE cuts GDP growth forecast for this year and next
• BoE says wage growth of 3.25% would be target-consistent
• Expects 5.3% unemployment by second quarter of 2026
• Sees private sector wage growth at 3.3% by end of 2026
• BoE sees GDP growth of 0.9% in ’26, 1.5% in ’27, 1.9% in ’28
• BoE raises peak unemployment forecast to 5.3% from 5.1%

COMMENTARY:

• BoE Governor Bailey says there is scope for further easing, not clear exactly when, expects ‘quite sharp’ inflation drop in coming months, sees weaker demand despite more positive surveys
• BoE's Deputy Governor Ramsden says demand risk if savings, consumption don’t normalise; Ramsden says core disinflation is clearly progressing
• BoE's Chief Economist Pill says structural changes mean disinflation slower than expected
• BoE’s Taylor says revisions keep showing less inflation, more slack
• BoE’s Dhingra says market-implied path for rates looks too tight, inflation persistence scenario less compelling
• BoE’s Breeden says policy should be eased faster than market path, new analysis shows lower wage growth, more slack
• BoE’s Mann says lower inflation should push down wage settlements, new analysis moves time for another cut closer
• BoE’s Greene says difficult to justify downward revision to slack
• BoE's Lombardelli says productivity may prove weaker than BOE predicts
• BoE’s Greene says future wages, prices, expectations a concern

FISCAL:

• November budget to have expansionary effect on growth.
• Expects 0.5ppts cut to inflation from labour budget policies