09:07 AM EDT, 05/08/2025 (MT Newswires) -- For all the hype, the Bank of England's Monetary Policy Committee basically took a step back on Thursday to where it was a month or two ago, said Sanjay Raja, Deutsche Bank's Chief United Kingdom economist, after the MPC voted to cut the Bank Rate by 25bps.

This is a more divided MPC, noted Raja. While the direction of policy is still down, the MPC continues to drag its feet on both the speed and scale.

A "careful" calibration of monetary policy is still very much a large part of the MPC's parlance. That doesn't seem to be changing, stated the bank's economist. The probability of sequential back-to-back rate cuts should drop on the back of this.

The path of least resistance should be quarterly rate cuts until there is more progress/clarity on the labor market and inflation. Deutsche Bank thinks this could happen in Q4 2025 when it gets a sense of where 2026 pay settlements are going.

According to Raja, these are the main issues:

-- The decision. As expected, the MPC cut Bank Rate by 25bps to 4.25%.

-- The vote tally. A three-way split with two members (Dhingra/Taylor) voting for a 50bps rate reduction and two members (Mann/Pill) voting for no change to Bank Rate. This leans more hawkish than dovish. Put another way, there are now have two members who may be thinking that policy could be sufficiently restrictive at these levels. Also it's worth noting that prior to global trade news, most of the five voters for a quarter point rate cut were debating no change in Bank Rate. Put simply, this is still a very cautious if indeed split MPC.

-- The forecasts. U.K. Gross domestic product was revised up in 2025 (1%), revised down in 2026 (1.25%), and lowered in 2027 (1.25%). Unemployment is expected to peak higher (5%) and get there faster -- another dovish tilt to the projections. Wages (private sector regular pay) were revised down to 2.75% in Q4 2026 and Q4 2027 -- again moving in a dovish direction. The BoE's CPI projections were downgraded in all three years of the MPC's forecast, and is now expected to return to target by the second year of the MPC's forecast horizon. All in all, the MPC is now projecting more spare capacity than it did in February.

-- The forward guidance. In what will likely be a disappointment for markets, the BoE's guidance was unchanged. For the MPC, "gradual and careful approach to the further withdrawal of monetary policy restraint remained appropriate." Also, "all members stressed that monetary policy was not on a pre-set path" was accompanied by a slight twist here -- perhaps a nod to added optionality: "The Committee would remain sensitive to heightened unpredictability in the economic environment and would continue to update its assessment of risks." The MPC not budging from its key line on maintaining sufficiently restrictive policy: "Monetary policy would need to continue to remain restrictive for sufficiently long."

For now, Deutsche Bank thinks its call for quarterly rate cuts until Q4 2025 seems like a good bet. The bank will need to see how the labor market evolves, including 2026 pay settlements, before perhaps the MPC can accelerate the pace of rate cuts.