Bank of England Votes Hawkish Despite Softer Rate Hike Expectations

The Bank of England's vote has turned more hawkish, but market pricing for future rate increases has softened. In a 6 to 3 decision, three policymakers voted for a 25-basis point hike against six who chose to keep policy unchanged.

This division marks the first time in six meetings that rates have not been held steady, with the committee's internal balance and market expectations usually moving together. However, despite the hawkish dissent, the priced path for hikes eased rather than firmed after the announcement.

Headline inflation rose, while services inflation, which reflects domestic price pressures, remained unchanged. According to Senior Market Analyst Fiona Cincotta, Governor Andrew Bailey's conditional language, 'he may need to raise interest rates if energy prices continue to rise', added weight to the hike, but noted that there was limited evidence of second-round impacts on wages and underlying inflation.