The Bank of England’s rate-setting policymakers are expected to hold the base rate at 5.25% for the seventh meeting in a row next week.  

Its Monetary Policy Committee will vote 7 to 2 in favour of hold, with external member Swati Dhingra and deputy governor Dave Ramsden voting for a 0.25% rate cut, forecasts Deutsche Bank senior economist Sanjay Raja.  

Raja says: “With wage growth and inflation surprising to the upside in April, we don’t think the majority of the committee will be in favour of dialling down restrictive policy just yet.”  

General prices fell sharply to 2.3% in April from 3.2%, but economists had expected this figure to be much closer to the BoE’s 2% target.    

Annual wage growth came in at 6% in April, unchanged from three months before. Several MPC members have said they want to see this figure firmly in the 5%-plus territory before they look seriously at cutting rates.  

The general election means that it is harder than usual for traders to understand policymaker’s latest thinking, as they will not give sensitive speeches until after the 4 July campaign.   

Raja expects this purdah will affect the MPC’s written statements, released after its vote on Thursday.  

“We don’t expect many changes to the Bank’s forward guidance, given the pre-election period,” says the German bank’s economist.  

Deutsche Bank is at the optimistic end of the scale in the London market, forecasting the first rate cut from the central bank in more than four years in August.  

Hargreaves Lansdown head of money and markets Susannah Streeter adds: “Policymakers still have their eye on hot wage inflation, with earnings including bonuses still running at 6%, at the last count. However, a cut in August is still a very real possibility.’’ 

The base rate has remained at its 16-year high of 5.25% since last August. The last time the central bank cut rates was in March 2020.  

But earlier this month, the European Central Bank cut interest rates for the first time in five years by 0.25% to 3.75% — beating the Bank of England and the US Federal Reserve to ease borrowing costs in its region. 

However, London money markets currently price in close to a 90% chance of the first BoE rate cut coming in September, November is fully-priced in, with three rate cuts in total by May 2025.