28th September 2022
At its latest meeting, the MPC voted by a 5-4 majority to hike the Bank Rate by 0.5 percentage points to 2.25%. Among the dissenting voices, three were in favour of raising rates by a larger amount of 0.75 percentage points, while the other would have preferred a smaller quarter-point rise.
When announcing its decision on 22 September, the MPC once again expressed a readiness to implement further rate rises as required. Specifically, the minutes to the meeting stated that, ‘Should the outlook suggest more persistent inflationary pressures, including from stronger demand, the Committee will respond forcefully, as necessary.’
The MPC’s next policy announcement is scheduled for 3 November, but some analysts have warned the Bank may need to act sooner following the sharp decline in the value of sterling in the aftermath of the Growth Plan. On 26 September, the BoE responded to this speculation by saying it ‘will not hesitate’ to raise interest rates if needed and that it was monitoring markets ‘very closely.’
Speaking at the International Monetary Policy Forum the following day, the Bank’s Chief Economist Huw Pill reiterated this position. Mr Pill said he had concluded that “the combination of fiscal
announcements that we’ve seen will act as a stimulus” before adding that this will require “a significant monetary policy response.”
The Bank is clearly under intense pressure to act decisively, either before or following the MPC’s next scheduled meeting. Money markets have already fully priced in a one percentage point increase in the Bank Rate to 3.25% at the November meeting and analysts have suggested rates could potentially hit 5.5% or even higher by next spring.