The Bank of England’s Monetary Policy Committee (MPC) left the bank rate unchanged at 5.25% today, in line with expectations. This was a hawkish hold, as the MPC sought to push back against market expectations that the BoE will quickly follow the Fed and the ECB in cutting rates, which had built up further in the wake of the Fed’s dovish pivot yesterday. The MPC said the decision whether to remain on hold or to raise rates was again “finely balanced”. BoE Governor Bailey said “there is still some way to go” to return inflation to target, that there are differences between the UK and US situation, and it was “too early” to speculate on rate cuts. The MPC minutes repeated their guidance that “monetary policy was likely to need to be restrictive for an extended period of time”. We continue to expect rate cuts to start in 3Q24, one-quarter later than cuts by the Fed and the ECB, reflecting the higher stickiness of wage growth and services inflation in the UK. But with the economy likely to enter a recession in the coming quarters, and inflation clearly moving down towards 2% next year, the risks are skewed towards an earlier start to cuts.