09:05 AM EDT, 09/19/2024 (MT Newswires) -- The Bank of England kept its Bank Rate on hold Thursday at 5%, as expected, said Sanjay Raja, chief United Kingdom economist at Deutsche Bank.

That said, the big news was perhaps the more unified message from the Monetary Policy Committee: a slow and steady removal of policy constraints.

The bank highlights three key takeaways from Thursday's decision:

-- The decision to hold the Bank Rate wasn't unanimous. While Deutsche Bank expected a more divided MPC, Thursday's decision highlighted a less divided MPC, with the vote tally coming in at 8-1.

-- The MPC struck a more cautious tone than the bank expected. But the door remains wide open for a Q4 rate cut. Indeed, for the majority of the MPC "a gradual approach to removing policy restraint would be warranted."

-- The Bank left its quantitative tightening envelope fixed at 100 billion pounds. What does this signal? By maintaining a steady QT envelope the MPC has implicitly signalled that the BoE puts more weight on the total stock of gilt reduction as opposed to the BoE's active sales footprint. Total sales for the next 12 months now will total 13 billion pounds.

All in all, Raja said Deutsche Bank maintains its call for one more rate cut this year. It sees Bank Rate falling to 4.75% by year-end. As a consequence, the bank continues to see four quarter-point rate cuts through 2025, followed by a further three more rate cuts in 2026, taking Bank Rate to 3%.

There are risks to Deutsche Bank's call, stated the economist. It sees risks skewed to a faster dial-down of restrictive policy in the near term. Put differently, the first phase of the easing cycle may be faster than the bank's baseline projections imply.

That said, Deutsche Bank also sees upside risks to its terminal rate view of 3%. Put differently, while the MPC may accelerate its speed in dialling down restrict policy over the next six months or so, the runway for rate cuts may be shorter than the bank's current expectations.