Societe Generale strategists anticipate that the Bank of England (BoE) will keep its Bank Rate unchanged at 3.75% at the upcoming meeting, with expectations of hawkish dissent from at least two members, Huw Pill and Megan Greene [1]. The strategists highlight that the BoE is the penultimate G10 central bank to meet before the end of July, following the Federal Reserve's decision to also leave rates unchanged [1].
The analysis points to a combination of easing inflation expectations, as measured by YouGov over the past month, and a loosening labour market, which are being counterbalanced by a rebound in energy prices and new government measures to support household incomes [1]. Despite these mixed signals, Societe Generale's base case is for BoE policy to remain on hold through 2026, though they do not rule out the possibility of higher rates if the conflict in the Gulf escalates [1].
Market pricing, as reflected in the OIS curve, suggests around 40 basis points of cuts by year-end, which Societe Generale views as aggressive given the current mildly restrictive policy stance and the ongoing loosening in the labour market [1]. For the British Pound, the strategists note that GBP/USD seasonality appears bearish in August, with the potential for further unwinding of the so-called 'Burnham bounce' [1].
CONCLUSION
Societe Generale expects the Bank of England to maintain its current policy rate through 2026, citing a mix of easing inflation and labour market conditions offset by rising energy prices and government support. Market expectations for rate cuts are seen as aggressive, and GBP/USD may face further downside in August due to seasonal trends.