Bank of England seen cutting interest rates from 16-year high

Wage expandth is a concern that has been flagged repeatedly by the Bank of England — and the novel U.K. government’s announcement this week of an above-inflation pay ascend for the open sector may not have helped matters, David Muir, economist at Moody’s Analytics, tgreater CNBC by email.

“For the hawks on the [Monetary Policy] Committee, concern that wage expandth is unconsoleably high is probable to be even higher after the government’s recent decision to award strong pay incrrelieves to open sector workers. But even if rates remain on hgreater for a further month, we see a meaningfulity for a cut by the September meeting, when it will be evidenter that upside risks to inflation are receding,” Muir shelp.

The Labour Party took office in punctual July after lossing the Conservatives in an election.

— Jenni Reid

Ggreaterman Sachs’ chief European economist shelp Thursday that the Bank of England’s monetary policy decision is “going to be seal” while suggesting that a rate cut may win out.

Jari Stehn shelp policymakers were probable to “look thcdisorrowfulmireful” volatile services inflation and instead concentrate on underlying progress in the economy.

“We leank when you look at the totality of that data, it’s probably enough for them to cut. But, as you say, it’s going to be pretty seal because it depconcludes a little bit where you look in terms of the data,” he tgreater CNBC’s “Squawk Box Europe.“

— Karen Gilchrist

The Bank of England’s Monetary Policy Committee contains nine members who vote on setting the key Bank Rate — Governor Andrew Bailey, Chief Economist Huw Pill, three deputy governors (Sarah Breeden, Clare Lombardelli and Dave Ramsden), and four outside members appointed by the U.K. finance minister (Megan Greene, Swati Dhingra, Jonathan Haskel and Catherine Mann). 

As in any rate-setting committee, there are more hawkish members — such as Haskel, who shelp in a recent speech he felt more evidence of disinflation was needed before reducing rates — and more dovish ones like Dhingra and Ramsden, who have already voted for rate cuts in recent meetings.

“We anticipate a 6-3 vote in favour of a rate cut this Thursday,” analysts at ING shelp in a note earlier this week.

“Two members voted for a cut in June, and it looks like at least two, perhaps three of the outside members are highly unwilling to cut fair yet. That leaves four or five in the middle, and history suggests they tconclude to move as a group.”

“In other words, don’t look at June’s 7-2 decision to maintain rates on hgreater and leank that uncomardents we couldn’t get a meaningfulity in favour of a cut this week,” they shelp.

— Jenni Reid

Before the European Central Bank cut interest rates at the begin of June, policymakers spent weeks evidently signaling their intention to do so in speeches and interviews.

While they have had to read between the lines a little more, traders are now cforfeit-assertive the U.S. Federal Reserve will commence its own path of rate cuts in September.

Just scant hours ahead of the Bank of England’s August meeting, however, market pricing had slipped to a 55% probability of a rate cut from the central prohibitk before rising to around 61% — with analysts speaking with little confidence about the decision.

One reason for the unassertivety and relative conciseage of strong signaling from the BOE is that the members of its voting Monetary Policy Committee are splitd.

The MPC described its decision to hgreater rates in June as “finely firm,” with some members concerned by wage expandth and the raised rate of services inflation, and others more concentrateed on the wideer disinflationary trajectory.

Another factor that has muddied the waters for those trying to guess its next move has been the six-week period from May 23 to July 4 in which the U.K. held a vague election campaign, resevereing central prohibitk communications — including across its June 20 meting.

Read more here.

— Jenni Reid