BoE Statement: Rates held at 4.25%, as expected, in a 6-3 vote (exp. 7-2), Dhingra, Taylor and Ramsden voted for lower rates; retains 'gradual, careful' language

RATE SPLIT:

• Dhingra, Ramsden, Taylor voted to cut rates by 25bps


• MPC members who voted to cut rates cited "material further loosening in labour market", subdued consumer demand, pay deals near sustainable rates

GOVERNOR COMMENTS: 

• Governor Bailey says UK interest rates remain on a gradual downward path despite June hold


• Says UK labour market softening, looking to see how much this feeds into CPI

POLICY STANCE: 

• Statement keeps phrase: "a gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate"


• Policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further


• Will decide the appropriate degree of monetary policy restrictiveness at each meeting


• All members stressed that monetary policy is not on a pre-set path

ECONOMY:

• Underlying UK GDP growth appears to have remained weak


• CPI expected to peak at 3.7% in Sept, remain just under 3.5% for rest of year (vs May forecast: Sept CPI 3.7%, CPI at 3.5% in Q3 on quarterly basis)


• Risks around medium-term path for CPI are two-sided


• Inflation persistence could also be generated by higher food prices raising inflation expectations, impacting wage and price setting behaviours


• MPC still expects significant slowing in UK pay growth this year

GLOBAL:

• Recent global developments did not have significant impact on June rate decision to hold rates


• MPC will remain sensitive to heightened unpredictability in economic and geopolitical environment


• Provisional staff analysis suggests direct impact of tariffs shock on global GDP could be smaller than expected in May


• Global uncertainty remains elevated, escalated Middle East conflict has increased energy prices


• Trade policy uncertainty will continue to hurt UK economy

Reaction details (12:12)

• GBP/USD fell from 1.3426 to 1.3401 while Gilts spiked higher from 92.75 to 92.94, the latter remains negative on the session, however.

Analysis details (12:12)

• As expected, the BoE left rates unchanged at 4.25%. Furthermore, guidance around a “gradual and careful approach to the further withdrawal of monetary policy” and the assessment that “policy will need to continue to remain restrictive for sufficiently long” were maintained.


• The decision itself was subject to a 6-3 vote split; Dhingra, Taylor and Ramsden voted for lower rates. Those three assessed that evidence pointed to a “material further loosening in labour market conditions”, subdued consumer growth/spending, continuing disinflation process and the risk of continued too-restrictive policy sparking an “unduly large output gap” in the medium term.


• From the six, they noted that while the disinflation process was continuing there was “not a strong case for a further easing of monetary policy”.  Furthermore, and interestingly, noting “recent global developments had not had a significant impact on this meeting’s policy decision”; seemingly a hat-tip to recent energy upside. On inflation, the six provide an extensive assessment around the two-sided risks the economy currently faces.


• Overall, the decision keeps the BoE on track for the quarterly pace of easing that has been seen over the last year (reminder, Pill dissented against rates in part due to this pace at the last gathering). Whether August or September sees the next move is going to be dictated by the assessment of the disinflation process, something we look to the Middle East, trade and domestic data for insight into; Flash PMIs due on Monday.

19 Jun 2025 - 12:00- EquitiesData- Source: Newswires