Danske Bank says broader signs of pass‑through of inflation are limited: core
inflation has held at 2.6% for three months and firms' one‑year own‑price
inflation expectations have fallen to 3.8%. July GDP rose 0.4% and the labor
market is cooling modestly — insufficient to justify an immediate rate hike.
Governor Bailey remains inclined to wait; Deputy Governor Lombardelli has said a
clear second‑round inflation effect is needed before policy shifts. Danske's
base case is Bank Rate at 3.75% through Q2 2027, though persistent high energy
prices and stronger growth could prompt an 'insurance' hike. Markets are priced
aggressively; a less hawkish BOE than expected would likely push EUR/GBP higher.
