The BoE is trying to re-establish its credibility. It remains to be seen to what extent it will manage to do that. The fact that it only hiked its key rate from 5% to 5.25%, suggesting that one slightly better inflation publication (the June inflation surprised with a lower value) was sufficient to reduce the speed of its rate hikes does not exactly point towards the BoE having changed its approach. Inflation data had previously disappointed for months and at 7.9% was still considerable in June.

If the inflation environment in Great Britain continues to improve, Thursday’s rate decision might turn out to be adequate. If the June inflation publication turns out to be a one off though the BoE is likely to seem too hesitant again, putting pressure on Sterling.