Fraser of Allender - Weekly update: So much for a quiet August

9th August 2025

As economic headlines pick up after a lull, the Fraser of Allander Institute highlights three key developments.

Bank Rate cut, but only after a second vote - At its August meeting, the Bank of England's Monetary Policy Committee (MPC) was split 5-4 on whether to cut Bank Rate by 0.25 percentage points.

One member, Professor Alan M. Taylor, initially pressed for a larger 0.5 point cut. When the decision was re-put to a head-to-head choice between a gentler 0.25 point reduction and holding rates, he sided with the majority cut, underscoring deep uncertainty about the economic outlook.

Embedded inflation may be more persistent than hoped - The MPC's latest Monetary Policy Report raised its forecast for September's Consumer Prices Index (CPI) to around 4%.

While core goods inflation is set to fall back toward its pre-pandemic average, services inflation remains stubborn, driven by wage growth running at 5–5.8% so far in 2025—well above the Bank’s assumed 0.4% productivity gain. Labour’s weight in service-sector costs, combined with employer National Insurance increases, suggests limited spare capacity and a stickier price backdrop.

Forthcoming GERS publication
Later in August the Scottish Government will publish its annual Government Expenditure and Revenue Scotland (GERS) report. This dataset details Scotland’s public revenues, spending and net fiscal balance, informing debates on the devolved budget’s health, the impact of UK-wide spending decisions and the role of North Sea receipts.

Taken together, these developments signal that both UK monetary policy and Scotland’s fiscal position are shaping up to be far from "quiet" as we head into the autumn.

Read the full article HERE