BoE ready to act ‘forcefully’

20th June 2022

After its latest meeting held in mid-June, the BoE’s nine-member Monetary Policy Committee (MPC) voted by a 6-3 majority to raise Bank Rate from 1.0% to 1.25%. This was the fifth consecutive meeting at which the MPC had tightened monetary policy and pushed rates up to their highest level in 13 years.

For the second meeting in a row, the three dissenting voices each called for a half-point hike and the minutes to the meeting stressed that the BoE was ready to take ‘the actions necessary to return inflation to the 2% target.’ The minutes concluded, ‘The Committee will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response.’

BoE Governor Andrew Bailey reinforced this message when speaking at a European Central Bank conference in late June. Mr Bailey said the Bank needed the option of half-point rate rises in order to address inflation and added “the key thing for us is to bring inflation back down to target and that is what we will do.”

When announcing last month’s rate rise, the BoE said it now expects inflation to peak ‘slightly above’ 11% in the autumn. A key driver of this anticipated rise will be higher household energy bills which look set to increase sharply in October as a result of Ofgem’s forthcoming price cap review.

The latest data released by ONS showed that inflation currently stands at a 40-year high. In the 12 months to May, the rate of inflation as measured by the Consumer Prices Index, rose to 9.1%, up slightly from April’s figure of 9.0%.