Medium-term outlook had not changed overall relative to June meetingShort-term outlook has become somewhat more “stagflationary”But weaker activity is likely to dampen inflation over timeEconomic balance remains lopsided, mostly still driven by services activityLabour market remains tightThe persistence in services inflation remains the central element shaping the inflation outlookInflation could turn out higher than anticipated if wages increased by more than expectedMonetary policy transmission was unfolding according to expectationsExtensive new data will be available by the time September meeting takes placeThe meeting is seen as a good time to re-evaluate the level of monetary policy restrictionBut should be approached with an open mind, which also implies data dependenceFull accounts
They still have about three weeks to guide markets the other way if they so choose not to cut again next month. But given the balance of probabilities and the prevailing language at the moment, a 25 bps rate cut is pretty much locked in.
This article was written by Justin Low at www.forexlive.com.
