BoE: On hold but sensitive to upside risk

Research evidence excerpt

BoE: On hold but sensitive to upside risk

Allan Monks Europe Economic Research J P M O R G A N(44-20) 7134-8309 30 July 2026

allan.j.monks@jpmorgan.com

be easy to take this out of context, as the BoE may well hike if the cited upside risks around

its central forecast do crystallize. The comment came in response to a loaded question from

a journalist.

Likewise, Lombardelli - who has leaned hawkish in the past - sounded dovish at the press

conference. She noted that her decision to hold was not close. Along with Bailey’s response,

these kind of comments have served to bring the market down a little. But her comments were

also in response to a specific journalist question, and her individual paragraph (discussed

below) was more nuanced and contingent.

Markers for higher rates

We find it hard to see the BoE hiking as soon as September, especially because recent outturns

on inflation, inflation expectations and survey measures of pricing have been showing a clear

moderation after their 2Q spike. Bailey used this to argue that subdued demand was limiting

business pricing power, while the minutes made it clear that there was “little evidence so far”

of second round effects. We maintain our forecast for a November hike, but that does require

at least some of the following triggers to be met:

• Inflation overshooting BoE forecasts. The BoE lowered its central projection for the

peak in inflation a little more than we expected, with the CPI at 3.2% in 4Q versus the

3.7% shown in Scenarios A and B in April. Our forecast is currently 3.4%, and an

overshoot relative to this could be significant for the BoE. The Bank already builds in

some indirect effects to core. But the July report frames progress on disinflation in terms

of various measures of underlying services inflation.