BoE Preview: September Meeting

Key Points

We posted this preview ahead of the BoE meeting in the Bloomberg chat. The meeting went broadly as we expected.

1. BoE to leave rates at 4% with a hawkish 7-2 split (i.e., 8-1 is more likely than 7-1-1 or 7-3). Taylor will vote for a cut. Dhingra is the wildcard. The rest will vote to keep rates unchanged.

2. Formal guidance in the statement and the minutes remains that a ‘gradual and careful’ approach to further withdrawing monetary policy restraint is still appropriate.

3. The statement and minutes should repeat that the MPC thinks A) ‘upside risks’ around medium-term inflationary pressures have moved slightly higher, B) ‘timing and pace of future’ reductions in the restrictiveness of policy would depend on the extent to which underlying disinflationary pressures would continue easing, and C) that the MP ‘was not on a pre-set path.’

4. After yesterday’s UK CPI, we are increasingly confident the MPC will be concerned about initial signs of disinflation stalling. This is because wage intensive services prices continue printing stronger than pre-Covid norms, with pressures also proving stronger than last year. Meanwhile, food prices continue tracking global food price indices. Also, labour market data showed no incremental dovishness while inflation expectations are rising.

5. The latest BoE/Ipsos Inflation Attitudes survey showed further rises in inflation expectations. Median expectations of the rate of inflation over the coming year were 3.6%, up from 3.2% in May 2025 (highest since February 2023).

The latest Decision Maker Panel also showed further rises in inflation expectations.

6. Regarding the actual reduction of the Asset Purchase Facility (APF) for the period October 2025 to September 2026, we think the MPC will vote to reduce the annual QT envelope to 60-70bn. We also think the shortening of the maturity profile of sales will slow the pace of long-end sales. The risk is that slowing QT is lower or does not happen, given that the MPR shows a small impact of QT on yields.

7. Today the BoE also publishes the Agents’ summary of business conditions.

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