Rhythmic Reasoning_Full Report_Final_EN - Flipbook - Page 30
THE DRUMMER'S EAR | RHYTHMIC REASONING
Recent labour market trends may now be more clearly reflecting
the drag that restrictive BoE policy is having on the real economy,
opening the door to a possible acceleration of rate cuts over the
next few quarters. At its June rate decision, the BoE highlighted
that they believe there is clearer evidence of greater slack in labour
markets, and that they expect significant slowing in pay growth
over the remainder of 2025. For now, we continue to think that
the bank will stick to a quarterly pace of rate cuts, with the next
coming at the July meeting, given an abundance of caution. The
Iran-Israel hostilities and their initial impact on oil and gas prices
was an important reminder for the BoE that its price goals could
suddenly be challenged by unforeseen circumstances.
Fig. 4: U.K. CPI has reaccelerated on goods
inflation while services disinflation stalls
15%
10%
5%
0%
-5%
2021
Goods CPI
2022
Services CPI
2023
2024
CPI ex. hous., utilities, fuels
2025
Headline CPI
Source: ONS, Scotia Wealth Management
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