Bank content to look through energy-driven inflation

The Bank's messaging accompanying its decision to leave interest rates unchanged at 2.25% in July suggests it has no intention of responding to energy-driven inflation with higher interest rates, given its continued concerns about the economy, with the labour market described as "soft" and references to "excess supply". This reinforces our view that the Bank will remain on hold this year, whereas money markets continue to price in roughly a two-thirds chance of a 25bp hike.