That said, taking a broader view, services is still generally heading in the right direction once you ignore the month-to-month volatility. Remember too that wage growth in the private sector is easing rapidly. We doubt there’s anything that will shake the conviction of the Bank’s doves, who argue immediate easing is necessary to offset potential weakness emanating from the jobs market.
The bottom line here is that there’s unlikely to be anything in this data that will change the minds of many voters on the BoE committee. That means the decision continues to hinge on Governor Andrew Bailey, who is somewhere between the two camps – though given he is more sympathetic to the view of the doves, we think he will still tip the balance in favour of a cut in December.
We doubt the forthcoming Autumn Budget will change that either. While gilt yields have risen following reports that the government has scrapped plans to increase income tax on account of a smaller fiscal hole, we are still probably looking at material tax hikes in 2026. At the margin, that helps build the case for a further loosening in monetary policy.