My MPC-ometer forecasts an “average interest rate decision” of -14 bp at this week’s MPC meeting. This is below the -12.5 bp threshold for action and suggests a 5-4 split in favour of a quarter-point cut.
As discussed in recent posts, the story is that activity indicators are firmly in rate-cutting territory but are being offset by the highest household and business inflation expectations since the MPC's inception.
A quarter-point reduction is expected by the overwhelming majority of economists. Interestingly, the Sunday Times Shadow MPC also voted 5-4 to cut.
Could the MPC surprise with a no change decision? In theory, the MPC-ometer’s -14 bp forecast would be consistent with five votes for unchanged, three votes for a quarter-point cut and one vote (presumably by David Blanchflower) for half a point. However, three-way splits on the MPC are rare (the last one occurred in May 2006), so I have discounted this possibility.