The Bank of England building (Credit: George Iordanov-Nalbantov)

Two hawkish members of the Monetary Policy Committee (MPC) are anticipated to vote for holding rates steady amid lingering price pressures.

According to Matt Swannell, Chief Economic Advisor to the EY ITEM Club, the MPC will likely have seen enough economic cooling to deliver the cut it signalled in June. “While upward revisions to official estimates of payrolled employees will have eased some concerns around job market prospects, the labour market has still weakened and pay growth has cooled more quickly than the Bank of England’s May forecast,” Mr Swannell noted.

However, he added that the Committee will remain cautious. Inflation has risen more than the bank expected three months ago, with food price increases being a particular concern due to their impact on household inflation expectations.

The MPC is expected to maintain its “gradual and careful” approach to monetary policy, reflecting a greater concern for cutting rates too quickly rather than too slowly. This suggests a continued trend of one reduction per quarter. Updated projections from the bank are likely to show inflation settling around the 2% target in two years’ time, based on interest rates falling to approximately 3.5% early next year.

With bank rate approaching a neutral setting, a key question is how much further the MPC intends to cut. While it is likely too early for the committee to deviate from its established messaging, analysts will be scrutinising communications for any new indications on how low interest rates could ultimately fall.