Bank of England Poised to Hold Rates at 3.75% Amid Sticky Services Inflation

The Bank of England is widely expected to hold its base rate at 3.75% when its Monetary Policy Committee announces its decision at noon London time on July 30, accompanied by a fresh quarterly Monetary Policy Report and a press conference led by the Governor. Financial markets have all but ruled out a move at this meeting, with market-implied probabilities of no change running above 90%. Yet the same market pricing suggests the Bank Rate could head higher over the year ahead, reflecting concern about persistent price pressures. UK consumer price inflation stood at 2.8% in May, but services inflation rose to 3.7%, keeping policymakers cautious. The June meeting produced a 7-2 vote to hold, with two members preferring a hike to 4.00%, one more hawkish dissent than in April. The rebound in oil prices tied to renewed conflict in the Middle East has added to inflation risks and prompted some traders to bring forward expectations of rate rises. For borrowers, fixed mortgage pricing moves on swap rates rather than the Bank Rate directly, and two-year swaps have climbed in recent weeks, even as some lenders trimmed selected fixed deals.