Burghley Capital: BoE Rate Cut Signals Cautious Policy Path
Division within the committee highlights differing assessments of the economic outlook
Four members support holding rates at 4.25% due to concerns over slowing disinflation and the risk of inflation expectations embedding into wage dynamics. Four others favour a 0.25 percentage point cut, citing evidence of sustained underlying disinflation, while one member initially calls for a 0.50 percentage point cut before aligning with the quarter-point reduction in the final vote. The outcome underscores what Burghley Capital describes as a deliberate, step-by-step policy stance that avoids premature easing.
Household impacts are uneven
For borrowers on tracker mortgages, a typical outstanding balance of £140,000 (approximately $189,000) translates into monthly repayments falling by about £28.97 (around $39.11). However, 7.1 million of the UK's 8.4 million residential mortgages are fixed-rate, meaning most borrowers will not see immediate payment relief. Burghley Capital's analysis notes that the near-term boost to household spending is therefore likely to be modest.
Inflation remains the key constraint on further easing
Consumer price inflation reaches 3.6% year-on-year in June 2025, up from 3.4% in May. Food prices rise 4.5% year-on-year, the highest since February 2024, while services inflation stays elevated at 4.7%, reflecting persistent domestic cost pressures. Labour market conditions show early signs of cooling, with unemployment at 4.7% for the three months to May 2025 and the vacancy-to-unemployment ratio slipping below its equilibrium level.
Markets respond with a measured repricing of assets
The pound strengthens 0.4% against the U.S. dollar to $1.35 and 0.6% against the euro. Two-year gilt yields increase by 6 basis points to 3.887%, reflecting reduced expectations for rapid easing. The FTSE 100 ends lower. According to Burghley Capital's analysis, these moves indicate that while investors see the Bank's decision as measured, they remain cautious about the prospect of further cuts in 2025.
Current market consensus anticipates no further adjustments until early 2026
Burghley Capital projects the Bank Rate settling at approximately 3.75% in the first quarter of next year, conditional on continued disinflation and stable employment data. The firm's analysis also highlights a growing divergence between the Bank of England and the European Central Bank, which has enacted eight rate cuts since June 2024, reducing deposit rates by around 50% from their peak. This divergence has potential currency and asset allocation implications for institutional investors.
Economic growth indicators present a mixed picture
UK GDP is forecast to expand by 1.25% in 2025, up from earlier 1% projections, but quarterly momentum slows sharply from 0.7% in Q1 to 0.1% in Q2. Corporate insolvencies rise 13% between the first and second quarters, while small business confidence remains in negative territory. Burghley Capital's analysis suggests that such conditions favour quality balance sheets, resilient cash flows, and prudent leverage strategies in both public and private markets.
Conclusion
Burghley Capital concludes that the Bank's cautious, data-dependent approach will remain the dominant feature of UK monetary policy into 2026. The firm notes that rate-sensitive assets, selective credit opportunities, and currency-aware strategies could benefit from this environment, provided investors maintain flexibility and a disciplined approach to capital allocation.
About Burghley Capital
Founded in 2017, Burghley Capital Pte. Ltd. (UEN: 201731389D) is a Singapore-based global investment management firm specialising in long-only asset management strategies. The firm delivers institutional-grade research, tailored portfolio design, and advisory services to both institutional and private investors. By combining rigorous analytical methods with disciplined investment practices, Burghley Capital seeks to deliver consistent returns and long-term portfolio resilience.
For more information, visit burghleycapital.com, opens new tab or our resources page at burghleycapital.com/resources, opens new tab.
Media Contact
Martin Weim.wei@burghleycapital.com
###
SOURCE: Burghley Capital
Copyright 2025 EZ Newswire
See release on EZ Newswire
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Auto Express
10 minutes ago
- Auto Express
Forget Netflix, Volkswagen locks horsepower behind paid subscription
If you thought paying out for Netflix, Amazon Prime and Disney+ was bad, Volkswagen is now forcing owners of the ID.3 to pay extra if they wish their car to deliver the full performance it's capable of. Yes, you read that correctly: Entry-level Volkswagen ID.3 Pure models are listed as producing 170kW (168bhp) on the VW configurator but take a look at the small print and you'll see that the car now comes electronically limited to just 148bhp, unless the owner pays a subscription fee. This subscription currently stands at £16.50 per month. That's almost three times the price of a 'Standard with Ads' Netflix subscription – following a one-month free trial - or a total of £165 per year. Owners can also choose to select a lifetime subscription for the grand total of £649, but Auto Express is awaiting confirmation from VW as to whether this is tied to the user profile or the car. Advertisement - Article continues below If you're thinking about buying an ID.3, you can spec a new one via the Auto Express' Buy A Car service or get a pre-owned model at prices from £9,000 with no subscriptions to pay. Volkswagen says that while selecting the performance upgrade increases net power from 148bhp to 168bhp and the maximum torque from 265Nm to 310Nm, it does not affect range. As the car is registered at 168bhp from the factory, owners won't need to inform their insurance company, either way. Nevertheless, it remains to be seen what would happen if an owner were to hack their car – also known as 'jailbreaking' – in order to manually switch on the extra power for free. This potentially could invalidate the warranty or even lead to legal action from VW, but once again Auto Express is waiting to hear back from the firm on this. To be clear, Volkswagen is not the only car company asking customers to pay in order to get the maximum capability out of their cars; BMW received a lot of criticism a few years ago when it offered up a subscription service to activate features like heated seats. Polestar owners can purchase a similar performance pack to that which Volkswagen now offers, although this is more of a software 'upgrade' to boost power, rather than unlocking power that was already there. Buy a car with Auto Express. Our nationwide dealer network has some fantastic cars on offer right now with new, used and leasing deals to choose from...
The Independent
10 minutes ago
- The Independent
No immediate plans to change ‘unfair' student loan interest, education secretary admits
Education secretary Bridget Phillipson has said on Thursday, 11 August, that there are 'no immediate plans' to change interest levels on student loan repayments. BBC Breakfast presenter Charlie Stayt asked Ms Phillipson whether it was fair to make students pay 9 per cent interest on top of existing student loan debt. 'We are looking at the student finance system; it is complicated,' the education secretary said. 'However, I do think that it is right that students make a contribution to their education.' She reiterated that there were more opportunities for young people receiving their A-level results on Thursday to pursue other than university, including apprenticeships.
BBC News
10 minutes ago
- BBC News
Can the UK still claim to be the fastest-growing G7 economy?
Half-full or half-empty? These latest UK gross domestic product (GDP) figures bring alive the classic metaphor about what exactly is in the reality is that growth of 0.3% in the spring quarter between April and June is a slowing from the start of the year's 0.7% at the same time, the news is positive because the economy had been expected to almost stop growing entirely, based on volatile monthly figures that had already been released. The data for June was much better, which is encouraging, while the bad figure for April - initially showing a 0.3% fall - was revised up to gauge contents of the proverbial glass, pick a latest monthly figure is good, well above expectations, driven by the service latest quarterly data show the economy growing, but the first half of the year, there has been solid growth overall during a fraught time, that exceeds that of other major initial response to the data was that the chancellor and prime minister would now have to retire the "fastest growing G7 economy" line, because it was no longer appears it will be true across the first half of the year, pending final data from this shifts the goalposts a bit, it can be of the criticisms of the G7 boast in the first quarter was that the 0.7% number was flattered by a shift of exports to the US to earlier in the year to avoid potential tariffs as well as housing transactions to reflect stamp duty the January-to-March and April-to-June figures does iron-out some of those one-off both periods shows 1% growth which is more than the rest of the advanced economies. During a period of totally unprecedented global trade uncertainty, a possible oil shock, tax rises and wobbly policy u-turns, that's solid certainly isn't consistent with the recessionary vibes given off in some quarters, which were given oxygen from the bad April GDP figure. The problem is that the doom-mongering - some of it which can be traced back to Downing Street rhetoric from a year ago - could become confidence has not been restored yet. There is a constant cycle of expectations of tax rises that do not help. The result is that UK consumers are saving a double-digit percentage of their income, which is basically pandemic level of post-inflation incomes are yet to translate into a feel good factor and trouble with taxes, worker-costs and job creation for the retail and hospitality industry is clearly very are very visible parts of the economy, and were disproportionately hit by the government's policies so far, and have rolled back their opening of job opportunities, especially for younger these sectors are not the whole economy and June figures showed, for example, the IT industry doing latest quarter would also have been hit by a dramatic fall in car exports to the US which will recover in the coming months after the signing of the UK-US trade trade terms with the European Union and India should also growth, albeit slow, is expected in the next few months. So while it is not particularly fast, the recessionary vibes are off the mark question is now from this point, do consumers and businesses start to act more confidently with spending and investment?That is still up for grabs.
