Policy makers led by Governor Andrew Bailey hinted that they may join a growing global trend for larger hikes if inflation continues to soar
The raised interest rates for a fifth straight meeting, placing them at the highest in 13 years, and sent its strongest signal yet that it’s prepared to unleash larger moves if needed to tame. The nine-member Monetary Policy Committee voted 6-3 to increase the benchmark lending rate by 25 basis points to 1.25 per cent. A minority of officials maintained their push for a move of double that size. Policy makers led by Governor Andrew Bailey hinted that they may join a growing global trend for larger hikes if continues to soar, saying “it would be particularly alert to indications of more persistent inflationary pressures, and would if necessary act forcefully in response.”
Crucially, that language was endorsed by all the BOE’s voters, a departure from May when two declined to sign up to guidance that more hikes were needed. The bank also raised its forecast for the peak of this year to “slightly above” 11 per cent, reflecting the planned increase in the energy price cap in October, and said it now expects the to contract in the current quarter. Investors raised their bets for further rate increases this year, pricing in a 3 per cent base rate by the end of the year.
