TS Pulse: Bank of england holdout

The ECB hiked, the Fed hiked, the Bank of Japan hiked, but the Bank of England remains unmoved.

• The Fed hiked rates by 25bps after a unanimous vote, and the dot plot signalled another hike before year end, matching market expectations. But beyond that there is now a real split. The market is pricing in another hike in Q1 and 90%+ chance of another in Q2, ending 2027 75bps higher than now. However, the Fed members’ dot plot covers a wide range. The largest group, eight, expect one hike in 2027, while the median is for no hikes, but there are three who see at least one cut next year, and one who expects to see rates 75bps lower than they currently are.
• The Bank of England opted to hold its base rate. The vote was split 6-3, but the three who voted to hike were expected. However, three of the six hold voters did mention the growing inflationary worries in their comments, appearing to us to support the market's expectations for a hike before year end.
• UK Public Sector Net Borrowing in August was £18.3bn, nearly £3bn higher than last August, £2.6bn ahead of market expectations, and pushing the borrowing in the current financial year to the end of August to £77.3bn, £8.1bn above the OBR forecast. This further squeezes the Chancellor's fiscal headroom ahead of next month’s budget.
• UK inflation in August came in as the market expected with the headline number up to 3.1% from 2.9% and the core remaining at 2.6% for a fourth consecutive month. Transport costs made the largest upward contribution as the price rises in petrol and diesel pushed motor fuel inflation to 23.0% from 15.5%.
• Brent crude moved back below $100 per barrel as optimism around negotiations between key countries in the Middle East conflict may yield some progress around this week’s UN meetings in New York.

Source: Bloomberg; pricing as per 22 September 2026

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