Meeting of 9-10 September 2026

September account confirms the unanimous 25bp hike to a 2.50% deposit rate, fully priced before the event. The fresh information is framing and nuance: the Council pointedly flagged that market pricing of two to three further hikes by end-2027 sits well above survey expectations of a 2.50% plateau, and insisted communication stay neutral on whether this was the last move. Underlying inflation details leaned soft, with services and core stepping down in August and no second-round wage effects yet. Net, the account tempers the aggressive market curve rather than reinforcing it.

What’s new: The decision is three weeks old and priced, so nothing new there. Genuinely new: the explicit acknowledgment of the market-versus-survey divergence on the rate path, with markets carrying two to three more hikes while the Survey of Monetary Analysts and Bloomberg/Reuters surveys point to a 2.50% plateau; the deliberate neutral communication guidance; the softer August services and core prints flagged as potentially meaningful for the core outlook; and the minority view that the adverse scenario is more likely than the baseline.

KEY FINDINGS

• Members flagged a large gap between market pricing (two to three further hikes, terminal above 3%) and survey expectations of a 2.50% plateau, saying the reasons behind the difference warranted further examination. The Council is declining to endorse the front-loaded market curve, which puts front-end steepness and hike premia at risk.
• On communication, the account states it should remain neutral, neither signalling a predetermined tightening cycle nor that this was the last hike. Caps both tails: no pause signal, but also no green light for the aggressive curve the market has priced.
• Services inflation fell from 3.3% in July to 3.0% in August and core edged down to 2.4%, with members saying this deserved close attention and could have a meaningful impact on the core outlook. Softer underlying inflation undercuts the persistence case and argues for a lower terminal rate.
• No second-round effects on wages so far, and it was argued the risk of second-round effects via wages could be lower than previously thought given a cooling labour market. Removes the main channel for a sustained inflation overshoot, a dovish trim to the persistence narrative.
• All members supported the 25bp hike, robust across all three scenarios, but a minority view held that the adverse scenario was more likely than the baseline. Keeps a hawkish floor: the distribution of views still skews one-sided enough that a further hike cannot be ruled out.
• Growth was revised up to 0.9% for 2026 and 1.4% for 2027, with the economy judged resilient enough to absorb higher rates. A resilient economy removes the constraint on tightening but also lifts neutral-rate estimates, leaving 2.50% still described as within the neutral range.

FROM THE DOCUMENT

This gap could be explained partly by risk premia embedded in the market curve and partly by the earlier timing of the surveys, although the reasons behind the difference warranted further examination.

In particular, services inflation had fallen from 3.3% in July to 3.0% in August.

Therefore, the risk of second-round effects via wages could be lower than previously thought.

the view was also held that the adverse scenario was more likely than the baseline.