The Chief Economist of the Bank of England, Huw Pill, will share the central bank’s new forecasts and policy decisions online. This event will take place on Friday, August 8, 2025, at 11:15 GMT. In the August meeting, the Bank of England lowered the bank rate by 25 basis points to 4.00%. This news has given some support to the GBP due to a split decision and expectations of slower rate cuts in the future.

The Decision’s Impact

Governor Bailey explained that pay growth was lower than expected, emphasizing the importance of not reducing the bank rate too quickly or too much. The atmosphere surrounding the Bank of England is becoming tense, and the split vote could lead to further gains in the pound’s value. While the rate cut to 4.00% was anticipated, the split vote shows a significant disagreement within the bank’s committee. We believe this is a “hawkish cut,” meaning the commentary is more assertive than the action. This suggests that further rate cuts will come slowly and based on data, which is why the pound is strengthening today. This cautious approach makes sense given the inflation situation. Although the headline CPI for July stayed close to the 2.0% target, the stubborn services inflation is still high at 5.7%. This ongoing price pressure explains why some policymakers are reluctant to lower borrowing costs too quickly.

Market Strategy and Outlook

Governor Bailey pointed out that pay growth has moderated to an annual rate of 5.8%, justifying today’s cut. This gradual easing is a welcome change from the rapid wage pressures seen in 2023. It gives the Bank more flexibility, but complacency is not an option. For derivative traders, the split decision suggests increased volatility in the coming weeks. One-month implied volatility for GBP/USD options has already risen above 8.5%, indicating market uncertainty about the Bank’s next steps. In this environment, buying options for bigger price movements could be a wise strategy. Given the hawkish tone, we are preparing for potential strength in the sterling against currencies with clearer easing, like the US dollar. Buying GBP/USD call options or setting up bull call spreads provides a defined-risk way to benefit if the pound continues to rise. We should pay close attention to Huw Pill’s speech later today for any hints that could support this optimistic outlook. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now