BoE Expected to Hold Rates, but Signals Tightening Looms

Goldman Sachs has released its analysis of this week's Bank of England (BoE) meeting, which is set to take place on Thursday. The financial institution expects the Monetary Policy Committee (MPC) to keep the Bank Rate at 3.75%, with a vote split of 6-3 looking most likely.

In its research preview, Goldman Sachs notes that there is some risk of a 5-4 split vote. This decision would be influenced by the rising energy prices, which have intensified the risks of material second-round effects since the last meeting.

The MPC's communications are expected to acknowledge these increased risks and reiterate its stance on inflation, stating that it stands ready to act as necessary to return inflation to target. However, Goldman Sachs believes there is a risk that the minutes may signal policy tightening will be needed in upcoming meetings.