Rates from the Bank of England were kept at 4.75%, as anticipated. However, the 6-3 vote divided delivered a slightly dovish signal to financial markets, which led to a less powerful pound and some dovish adjustments for the stock market.
BoE Rate Outlook
The Bank of England maintained the Bank Rate at 4.75%, as was generally anticipated. In 2025, the Monetary Policy Committee has made it clear that it will not commit to the extent and timing of rate reductions. The forward direction has remained extremely wary and data-dependent. This comes after a recent barrage of data revealed a spike in inflation for sticky amenities and wage increases.
The narrow MPC vote split—three in favor of a 25bp cut and six in favor of a hold—slightly shocked the markets. Only the ultra-dove Swati Dhingra might have voted for a reduction, as we and the market likely expected, but Dave Ramsden and Alan Taylor joined her. With a term that began only in September 2024, the last one is an external member.
Impact Of BoE On The UK Economy
Despite the most recent hawkish wage data, the MPC's obvious expanding dovish front may indicate a stronger emphasis on slowing activity. This supports the dovish outlook on the Bank of England for the upcoming year, putting pressure to the index line UK100.
The November retail sales rebound was disappointing both monthly and annually. Likewise, the December distributive trades survey from the Confederation of British Industry showed improvement but fell short of expectations.
In business news, cruise line Carnival plc (CCL) saw a 3.62% increase after announcing a return to net earnings in fiscal 2024 due to increased revenue. Additionally, it projected a 20% yearly growth in modified net income for fiscal year 2025.
