“Today’s decision to cut interest rates was on a knife-edge, as illustrated by the narrow majority of the Monetary Policy Committee voting in favour. At best, there is only mixed evidence that inflation persistence has been defeated. While the labour market is loosening and wage growth slowly easing, the unexpected strength in services inflation remains a red flag.
“We still think that today’s meeting marks the start of a rate cutting cycle, but the pace of this is now more uncertain. Several MPC members will be looking for more definitive signs of inflation persistence easing, to be swayed towards reducing rates further. They will also be conscious of continued upside risks to inflation, with economic growth firming and survey measures of manufacturing pricing pressures picking up.”
