BoE Seen Holding Rates at 3.75%, Despite Hawkish Dissent
The Bank of England's (BoE) upcoming meeting is expected to result in no change to the Bank Rate, which stands at 3.75%. Societe Generale strategists believe that hawkish dissent from BoE members Huw Pill and Megan Greene is likely.
The easing inflation expectations and loosening labour market are countered by higher energy prices and government income support. As a result, the base case for policy remains on hold through 2026, with a risk of higher rates not ruled out depending on the conflict's evolution in the Gulf.
The OIS curve is pricing around 40bp by year-end, which is considered aggressive given the mildly restrictive policy and loosening labour market. For GBP/USD, the seasonality turns bearish in August, which could lead to further unwinding of the Burnham bounce.