ING: One Summer Hike Likely for BoE as UK Economy Softens

ING economist James Smith assesses the Bank of England's upcoming policy decision, highlighting a significantly softer UK economic backdrop than in 2022. Key indicators point to a cooling labor market: vacancies are declining, unemployment is rising, and wage growth is decelerating. Smith notes that both firms and workers have limited pricing and bargaining power, further dampening inflationary pressures.

In this context, Smith judges that the BoE is caught between two options: a prolonged pause in the current rate cycle or a symbolic single rate hike this summer. The balance leans toward one hike being likely, but the overall environment does not support a sustained tightening campaign.

The analysis comes as markets weigh the BoE's next move amid mixed signals from the UK economy.