Economic developments since the last meeting have raised concerns of “stagflation” in the UK, i.e. slow growth with strong inflation. As the main constraint to growth is supply chain, we do not expect this to derail BOC’s monetary policy stance. We expect the central bank to vote unanimously to leave the Bank rate unchanged at 0.1% and 8-1 to keep the asset purchase program at 875B pound. BOE split evenly in August on whether basic conditions for rate hike have been met. The focus of this meeting is whether and how the two new committee members would affect this balance.

On the flip side, GDP growth eased to +0.1% m/m in July, from +1% a month ago. The PMI data also show that both services and manufacturing sectors are losing momentum. The services PMI dropped -4.6 point to 55 in August. While staying in the expansionary territory, the reading marks the slowest since February. The manufacturing PMI also eased to 60.3 in August, from 60.4% a month ago. However, slowdown in economic activities has mainly been brought about by the supply chain disruption, rather than demand.