Early last month, the Bank of England (BoE) announced a further hike in its benchmark interest rate and warned that rates were likely to remain high for some time.
Following its latest meeting which concluded on 2 August, the BoE’s nine-member Monetary Policy Committee (MPC) voted by a 6-3 majority to raise Bank Rate by 0.25 percentage points. This was the 14th consecutive increase sanctioned by the MPC and took rates to a 15-year high of 5.25%.
Two of the committee’s dissenting voices – Catherine Mann and Jonathan Haskel – voted for a more significant hike, preferring a 0.5 percentage point rise in order to “lean more actively against inflation persistence.” The other dissenting member – Swati Dhingra – again voted for no change, warning that the risks of overtightening “had continued to build.”
Although this difference in opinion shows that individual members of the committee are likely to hold differing views on the future path of interest rates, the minutes to the meeting did stress that further monetary tightening may be required. They concluded, ‘The MPC will ensure that Bank Rate is sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term.’
On the day that he announced the decision, BoE Governor Andrew Bailey reiterated that message saying “we might need to raise interest rates again.” The Governor added that it was “far too soon” to speculate about the timing of any cuts and that rates would not fall until there was “solid evidence” that rapid price rises are slowing.
The next MPC meeting is due to conclude on 20 September with the rate announcement scheduled for the following day. A recent Reuters poll found economists now typically expect another quarter-point hike to be sanctioned at that meeting with rates then peaking at 5.5%.