The Majority (Hold at 3.75%): Governor Andrew Bailey and five other members concluded that 3.75% remains sufficiently restrictive to curb inflation, especially with market conditions already tightening due to Middle East tensions. They preferred to pause and assess incoming wage and energy data rather than risk dampening an already fragile domestic economy.
The Minority (Hike to 4.0%): Three members advocated for a proactive rate increase as a safeguard against persistent inflation, which has hovered above the 2% target for nearly five years. They pointed to risks from escalating Middle East conflict and energy price spikes, arguing that over-tightening is less costly to the economy than under-reacting to inflation.
Economic Outlook & Key Risks
Opposing Pressures: The UK economy is caught between a cooling domestic environment (slowing wage growth, a weaker labor market, and soft demand) and external inflationary shocks (volatile energy prices, global trade tariffs, supply chain bottlenecks, and food price pressure from El Niño).
The Main Uncertainty: CPI inflation dropped to 2.6% in June, but energy price volatility—driven by Middle East instability is expected to push inflation back up. While second-round effects on broader prices and wages remain minimal for now, preventing them remains the MPC's core focus.
GBP/USD is attempting a bullish short-term recovery after a strong impulse candle pushed price to 1.33958, breaking above its 24-period SMA (1.33194) and bouncing cleanly off support near 1.3280–1.3300. While the higher-timeframe structure remains cautious following the sharp drop from the 1.3540 peak, holding above the 24 SMA opens the door for a retest of intermediate resistance at 1.3475, whereas a failure to sustain momentum above 1.3380–1.3400 risks dragging the pair back down toward the 1.3300 demand zone..