Cooling Wages, Steady Inflation To Keep BoE On Hold Ahead Of QT Review
- MPC seen voting 7-2 to keep Bank Rate at 4.00% - Quantitative tightening slowdown to GBP 60bn eyed - Wage growth cools, inflation steady at 3.8% y/y - Bank may update ‘Gradual and careful’ guidance - Rate announcement due 12:00 BST/11:00 GMT
LONDON – Slowing wage growth and stubborn consumer prices vie for the Bank of England’s attention ahead of Thursday’s policy decision, though neither is expected to move the needle for rates.
The Monetary Policy Committee is widely expected to vote 7-2 to leave Bank Rate unchanged at 4.00%, though analysts caution there is a risk of a more dovish tilt.
BofA Global Research said the BoE’s gradual guidance, July’s firm inflation print and a hawkish August meeting all point to a hold in September. “Guidance should be unchanged, also emphasising that monetary policy is not on a pre-set path, with the timing of future cuts dependent on the extent of underlying disinflationary pressures easing.”
This week’s data from the Office for National Statistics painted a mixed picture.
On Tuesday, figures showed the labour market continued to cool over the summer. Payrolled employees decreased by 142,000, or 0.5%, in the year to July, and fell by 6,000 between June and July. The early estimate for August showed a fall of 127,000 on the year and 8,000 on the month, taking the total to 30.3 million.
“Wage growth excluding bonuses edged down further in cash terms, though it remains strong by historic standards,” said Liz McKeown, ONS director of economic statistics.
Inflation data on Wednesday showed little change. Headline CPI rose 3.8% y/y in August, in line with July and expectations. Core CPI eased to 3.6% from 3.8%.
Economists said the readings were consistent with the BoE’s latest forecasts and unlikely to shift market pricing ahead of the decision.
Balance sheet in focus
August MaPS survey showed an interquartile range of GBP 60bn-75bn, with a median of GBP 72bn c/o Barclays Research
With rates set to remain on hold, attention will fall on the pace of quantitative tightening (QT).
BofA expects a slowdown from the current GBP 100bn annual target to GBP 60bn. “We think QT is likely tightening monetary conditions. The BoE in August also noted the risk that QT has a greater impact on gilt market functioning, keeping the door open for a slowdown.”
Future path
Outside of Monetary Policy Report meetings, communication is typically limited; therefore, markets will scrutinise the statement for changes in forward guidance.
Deutsche Bank flagged a meaningful risk that the MPC drops its ‘gradual and careful’ language. “There’s reason to wait – at least until the MPC delivers one more rate cut. But equally, the committee may be looking for more optionality and flexibility in calibrating policy, with its guidance now looking rather stale.”
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- MPC seen voting 7-2 to keep Bank Rate at 4.00%
- Quantitative tightening slowdown to GBP 60bn eyed
- Wage growth cools, inflation steady at 3.8% y/y
- Bank may update ‘Gradual and careful’ guidance
- Rate announcement due 12:00 BST/11:00 GMT
By Harry Daniels
LiveSquawk News
@HarryDaniels71
17 September 2025 | 11:00 GMT
LONDON – Slowing wage growth and stubborn consumer prices vie for the Bank of England’s attention ahead of Thursday’s policy decision, though neither is expected to move the needle for rates.
The Monetary Policy Committee is widely expected to vote 7-2 to leave Bank Rate unchanged at 4.00%, though analysts caution there is a risk of a more dovish tilt.
BofA Global Research said the BoE’s gradual guidance, July’s firm inflation print and a hawkish August meeting all point to a hold in September. “Guidance should be unchanged, also emphasising that monetary policy is not on a pre-set path, with the timing of future cuts dependent on the extent of underlying disinflationary pressures easing.”
This week’s data from the Office for National Statistics painted a mixed picture.
On Tuesday, figures showed the labour market continued to cool over the summer. Payrolled employees decreased by 142,000, or 0.5%, in the year to July, and fell by 6,000 between June and July. The early estimate for August showed a fall of 127,000 on the year and 8,000 on the month, taking the total to 30.3 million.
“Wage growth excluding bonuses edged down further in cash terms, though it remains strong by historic standards,” said Liz McKeown, ONS director of economic statistics.
Inflation data on Wednesday showed little change. Headline CPI rose 3.8% y/y in August, in line with July and expectations. Core CPI eased to 3.6% from 3.8%.
Economists said the readings were consistent with the BoE’s latest forecasts and unlikely to shift market pricing ahead of the decision.
With rates set to remain on hold, attention will fall on the pace of quantitative tightening (QT).
BofA expects a slowdown from the current GBP 100bn annual target to GBP 60bn. “We think QT is likely tightening monetary conditions. The BoE in August also noted the risk that QT has a greater impact on gilt market functioning, keeping the door open for a slowdown.”
Outside of Monetary Policy Report meetings, communication is typically limited; therefore, markets will scrutinise the statement for changes in forward guidance.
Deutsche Bank flagged a meaningful risk that the MPC drops its ‘gradual and careful’ language. “There’s reason to wait – at least until the MPC delivers one more rate cut. But equally, the committee may be looking for more optionality and flexibility in calibrating policy, with its guidance now looking rather stale.”