BoE view change On hold as Maradona effect prevails?

Research evidence excerpt

BoE view change On hold as Maradona effect prevails?

Economics ● United Kingdom

18 June 2026

‘Maradona effect’, coined by former BoE Governor Mervyn King in 2005, which is of course

particularly apt at the moment. It refers to using market expectations of a rise to tighten

conditions, without actually having to formalise higher interest rates.

As was the case in the April minutes, Sarah Breeden was explicit about this, in her comments.

The financing conditions facing households and firms

have tightened materially since the conflict, leaning  against inflationary pressures and leaving us well placed

to monitor how the economy evolves.

Sarah Breeden, MPC minutes, June 2026

Of course, this is not easy to pull off. The two hawks noted that tighter market conditions might

Market pricing buys a little

recede if a hike is not delivered soon. But at least that has not happened as a result of the Junemore time

statement. The MPC look like they will get to “wait and see” a little longer.

So, we understand – and expected – the BoE’s cautious tone. The brighter April/May labour market

data also made for a mild reversal of dovish sentiment, and again, the risks here are real. We don’t

feel that the jobs numbers were particularly hawkish, but the strength in total pay growth (ie pay

including bonuses) is potentially a risk. Whether firms are paying more in bonuses or regular pay, it’s

still a cost that may need to be passed on (see A little brighter, 18 June 2026).

Changing our own forecasts as upside risks recede

Given the more positive news from Iran, the change in our own inflation forecasts and ongoing softness

We now see no hikes

in the economy, our base case is now for no rate rises from the BoE. Previously, we had pencilled in

two hikes (in July and September).