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BoE Holds at 3.75% as Middle East Risk Drives Policy Path
The Bank of England held rates at 3.75% with a 6-3 vote. Governor Bailey said future policy depends on Middle East developments. Deputy Governor Ramsden flagged a possible return to cuts if risks fade.
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The Bank of England held Bank Rate at 3.75% on Thursday, a decision that surprised nobody. The vote split shifted to 6-3, with Catherine Mann joining the hawkish camp. That was not a shock given her recent public remarks.
The Monetary Policy Report included three scenarios, all built around energy prices and second-round effects. The central projection – conditioned on futures curves for energy and assuming only moderate, persistent domestic price pressures – puts CPI inflation at 2.6% one year ahead. That is lower than all three scenarios the BoE published in April.
Governor Andrew Bailey told reporters the committee sees little evidence of second-round effects on inflation so far. He also said it might be necessary to act before any such effects appear. What is becoming clear from the press conference is that the policy path now depends heavily on developments in the Middle East.