"Today's decision reflects a domestic inflationary environment that has evolved more favourably than expected. Inflation has undershot the Bank's previous forecast, wage growth has continued to moderate, and business surveys point to softer pay settlements and inflation expectations. Together, these developments strengthen the case for keeping interest rates unchanged, with little evidence so far that the recent energy shock has led to broader, more sustained domestic inflationary pressures."
"The vote split and minutes suggest that the debate within the MPC remains centred on the risk of persistent inflation and the potential for second-round effects from the energy price shock. While three members of the Committee favoured an immediate rate increase, the majority judged that current policy settings, combined with the tightening in financial conditions since the conflict escalated, remain sufficiently restrictive. The decision leaves the MPC with time to gather further evidence on whether higher energy costs will feed through into domestic price and wage setting.
"Looking ahead, the key consideration for the September meeting is likely to be developments in energy prices rather than the domestic economy. The longer energy prices remain elevated, the greater the risk that higher costs begin to feed through into wages and pricing decisions. However, current domestic indicators continue to move in the opposite direction, and we see little risk of underlying inflation pressures materially strengthening between now and the next MPC meeting."
