BoE Maintains Cautious Guidance with Dovish Tones, According to BofA

BofA Global's research characterized the Bank of England's (BoE) latest decision on Thursday as dovish. The bank noted the cautious 6-3 vote split and indicated the likelihood of interest rate cuts commencing in February 2025. BofA also emphasized that the BoE's assessment of the labor market has shifted from "relatively tight" to "generally balanced," reflecting a more moderate outlook.

Despite recent increases in inflation and wage growth, the BoE's guidance suggests a gradual path toward interest rate reductions. BofA forecasts that the next cut will occur in February, with rates gradually falling to 3.50% by early 2026. According to BofA, following the Bank of England's decision, the market's pricing of interest rate cuts softened, but not as much as expected based on the dovish tone of the meeting minutes.

The central bank reiterated its cautious approach, highlighting the necessity for a gradual policy adjustment. This decision reflects ongoing concerns about persistent domestic inflation and uncertainties surrounding economic growth and inflation projections.