Synopsis:

Bank of America (BofA) expects a close vote for a 25bps rate cut at the Bank of England’s (BoE) August meeting, highlighting a dovish bias despite challenging data.

Key Points:

1. Expected Rate Cut:

   • Vote Prediction: BofA expects a narrow 5-4 vote in favor of a 25bps rate cut.
   • Close Call: The decision is anticipated to be closely contested.

2. Data versus Dovish Stance:

   • Challenging Data: Key data still challenges a dovish stance, not clearly indicating that inflation persistence has been beaten.
   • Dovish BoE: Despite the data, the BoE appears keen to cut rates, potentially explaining away some upside strength to justify a cut.

3. Future Rate Path Guidance:

   • Lack of Clear Guidance: BofA expects the BoE will not provide clear guidance on the future rate path.
   • Data-Dependent Approach: The focus will remain on data to determine the timing of future moves rather than signaling the start of a sustained cutting cycle.

Conclusion:

BofA anticipates a close decision at the BoE’s August meeting, expecting a narrow vote for a 25bps rate cut. While the data does not clearly support a dovish move, the BoE’s inclination to cut rates may prevail. However, the BoE is likely to maintain a data-dependent approach without committing to a sustained rate-cutting cycle.