Bank of England: The Key Signs that Show a June Rate Cut is Likely

Above: It might not take much to convince other MPC members to cross the floor and join Dave Ramsden in voting for a rate cut. Image credit: Bank of England.

Just two members of the Bank of England's policy-setting committee voted to cut interest rates today, but this is one more than did so last time, and there are signs that more will jump on board 'team cut' next month.

The tone of the Bank's May guidance suggests members of the Monetary Policy Committee (MPC) need to see further evidence that inflation is about to stick to the 2.0% target in order to vote for an interest rate cut.

But the minutes also indicate that it won't take much further improvement in the data for some to jump ship and leave the 'holders' in a minority.

There was "a range of views" about how much evidence was needed before changing rates and regarding "the degree to which these members anticipated that incremental information in forthcoming data outturns would lead them to update materially their assessment of inflation persistence".

In short, some only need incremental improvements in inflation and wage data to cross the floor.

MPC member Dave Ramsden voted to cut rates, hinting in a recent speech that he was ready to vote for a rate cut because he believed inflation risks were receding.

And it looks like he convinced his fellow MPC members to share his assessment by adding the following line to the May minutes:

"The assessment that the risks from inflation persistence are receding".

The Bank has long said it is data dependent, but we are now at a point where a soft data print really will bring about a pivot in policy at Threadneedle Street, meaning next Tuesday's wage and job data will be of heightened importance.

The following week brings inflation figures and we expect any notable slowing in services inflation will seal the deal.

"For us, the main takeaway from the meeting is an emphasis on data-dependence. In this context, markets are set to be even more focused on upcoming economic readings, which are set to guide the timing of BoE's policy easing," says Roman Ziruk, Senior Market Analyst at Ebury.