BOE expected to hold rate at 3.75% as vote breakdown draws focus

Unless there is a big surprise, the headline decision from the BOE later today should not generate excessive suspense. The central bank is broadly predicted to maintain the bank rate at 3.75%, with markets pricing in nearly an 80% probability of that result.

The more compelling matter is what occurs beneath that decision, especially whether the vote on the bank rate remains 6-3 or tightens to 5-4.

Another 6-3 vote is the general expectation, but uncertainty revolves around Lombardelli's stance. She is the sole wildcard, having previously pointed to the danger of second-round effects coming from persistently elevated energy costs.

Since then, energy prices have only risen further, so the issue is whether that has been sufficient to move her into the hawkish camp alongside Pill, Greene, and Mann.

A 5-4 outcome would not automatically signal an imminent November rate hike, but it would create a far more uncomfortable debate for those favouring a hold. This is especially true given that markets are already bracing for it, with the likelihood of a November move now priced at close to 70%.

Beyond the bank rate vote itself, attention will be on whether any member describes the decision as “finely balanced”. There is also the question of whether the central bank's collective guidance becomes more explicit about the upside risks to inflation.

That will be assessed against the bank's current narrative, which is still weighing higher energy-driven inflation against the backdrop of a softer labour market and relatively limited evidence of broader second-round effects, at least for now.

After the decision, the individual paragraphs from Bailey and Lombardelli should probably be the first place to examine. A 6-3 vote paired with largely unchanged language would suggest policymakers remain comfortable waiting for more evidence before November. But a 5-4 split, or stronger language about the need to act, would make current tightening expectations for November look more justified.

Beyond that, there is also the QT decision to monitor. The clear consensus here is £50 billion for the annual APF rundown, along with some focus on whether the BOE reduces or ends long-dated gilt sales.

For sterling and the front end of the gilt curve, however, the vote split and the message surrounding November should be the main drivers today.