The Bank of England is expected to raise interest rates again on Thursday, but at a slower pace than last month, following cooling inflation pressures.
A 25-basis point increase is broadly expected although a 50bp rise can’t be ruled out.
It would be the 14th consecutive increase and take the Base Rate to 5.25%, the highest level since 2008.
Since the Bank’s last meeting there have been some more encouraging figures on inflation which “should take the pressure off the BoE to deliver another bumper rate increase at this month's meeting", according to Matthew Ryan at Ebury.
Simon French, chief economist at Panmure Gordon, notes “financial markets see it 70:30 in favour of 25bp vs 50bp”.
“The smaller increment would appear more sensible given the leading indicators (broad money growth, commodity prices, inflation expectations, high labour inactivity, weak sterling) have all shown improvements in recent weeks,” he thinks.
The Bank of England is also expected to raise its predictions for economic growth in 2023 and update guidance for inflation.
But French thinks of more importance will be the guidance offered towards further increases in interest rates.
“I suspect the MPC will give itself optionality for a pause in September if the crucial July CPI data (16 Aug) is another downside miss,” he said.