Bank of England Holds Rates but Warns It Could Raise Them
The Bank of England held interest rates at 3.75 per cent on Thursday, the fifth meeting in a row without a change, but warned it stood ready to raise them if the oil-price shock from the Iran war fed through into wages and prices. The Governor, Andrew Bailey, said the Bank was “not edging” towards a rise and saw “no evidence” yet of second-round effects, but cautioned that disinflation was proceeding “at a slow pace”. The decision was not unanimous.
Mr Bailey struck a careful balance, playing down the prospect of imminent tightening while keeping the option firmly on the table should the surge in energy costs prove lasting. The committee was divided, with some members favouring a different course, and the Bank warned that inflation was likely to stay above its target for some time. Markets took the message calmly: the FTSE 100 touched a record high before easing back, gilt yields fell and sterling firmed, as investors trimmed bets on a near-term rise. For borrowers, rates staying put brings a measure of stability, though the warning signals that cheaper money is not assured. Watch how the oil price and wage data shape the Bank’s next move.