Bank of England policymakers kept interest rates unchanged today but left the door ajar to a potential cut at their next meeting, which is not til August.
Minutes from the meeting suggested the monetary policy committee (pictured) is "itching to cut rates", one economist suggested.
The MPC voted 7-2 in favour of standing pat, for the second meeting in a row, with Swati Dhingra and Dave Ramsden again the two members who voted for a rate cut.
Minutes from the policy meeting revealed that for some other MPC members the decision to hold rates steady was "finely balanced" as they noted that the softening of recent inflation data was continuing even with stubbornly high wages and service prices.
These members are willing to look through high pay growth and high levels of service price inflation and they are more worried about the outlook for growth.
While Bank Rate stayed put at 5.25%, multiple MPC members downplayed the upside surprises in the price and wage data, instead putting more stock in forward-looking survey data, observed Sanjay Raja, chief UK economist at Deutsche Bank.
"Put differently, the MPC has softened its focus on the hard price data, in favour of a broader macroeconomic outlook."
The MPC minutes were "a dovish surprise" and the MPC "has left an August rate cut on the table", said Raja, who think that the MPC will start dialling down current restrictive policy this summer and deliver a total of two rate cuts this year.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said the minutes "suggest rate-setters are itching to cut rates" but that does not mean they will in August.
Several members of the committee seem "keen to dismiss any data suggesting persistent inflation pressures," he said, with the key addition to the minutes was that "some" members in the majority voting to keep rates on hold in June said "the policy decision at this meeting was finely balanced".
Wood says this suggests "three additional members could be ready" at the MPC’s next meeting in August to join Dhingra and Ramsden in voting for a cut, which would give a majority to change policy.
He says he agrees with the market's expectation of an August cut being odds-on after these minutes, though he is sticking with his call that the MPC will wait until September.
Partly this is because one of the rate-setters seeing a cut as finely balanced could be Ben Broadbent, for whom this was the last MPC meeting, the other reasons being that wage growth numbers and inflation could continue to surprise the MPC on the upside in the next round of data.
"They will have better data by September we think. Either way, we think the MPC are on track for two Bank rate cuts this year. We expect those cuts in September and December, but the risks skew to August and November," said Wood.
Kathleen Brooks, research director at XTB, said agreed that it "sounds like there are several MPC members ready to cut rates and that there is a decent chance that if we see wage growth and service prices recede in the next month, then an August rate cut is possible".
The market quickly gained confidence over an August rate cut from the BoE, she noted, with the market pricing in a 60% chance of a cut at the August meeting, up from a 35% chance before the meeting, according to the swaps market.
Meanwhile, the pound fell 0.2% against the dollar to $1.2689 and two-year Gilt yields moved down nearly 9 basis points.
While this month's rates call was widely expected by the market, the monetary policy report and minutes from today’s meeting had some interesting new points, said Brooks, which has "kept ajar the door for an August rate cut".
She said the key section was at the end of the report, saying "as part of the August forecast round, members of the Committee will consider all of the information available and how this affects the assessment that risks from inflation persistence are receding."
"The market can bask in its hopes for a rate cut, as MPC members will now enter a quiet period until after the election, so they won’t have any members pouring cold water on their hopes for a rate cut in 6 weeks," said Brooks.