The BoE is mulling whether to raise bank rate by 25 bps or by 50 bps for a second successive meeting. The choice could depend on whether the bank believes wage growth (AWE ex-bonuses 7.3%) keeps inflation higher for longer. For bank rate, we forecast 25 bps followed by another 25 bps in September to a peak of 5.50%.

Previous MPC decisions this year have almost uniformly resulted in a decline in GBP/USD and a rally in EUR/GBP, the one exception being March when Cable rose 0.4%. 

Equally as important will be the new inflation forecasts. The implied peak rate has shot up since May to 5.75% and implicitly this should be helpful to inflation returning to target faster towards the end of the forecast period.