Bank of England Policymakers Disagree Over Future Inflation and How Much to Tighten

September 22, 2022

The Bank of England‘s policy meeting must have had a lively discussion. Only five of the nine members of the Monetary Policy Committee agreed with the 50-basis point size of today’s base rate hike. Three want a hike of 75 basis points, which is what street analysts were anticipating, but one member voted to raise the rate by just 25 basis points. There had also been a 50-basis point increase at the prior review in August, preceded by four 25-bp increases during the first half of 2022 and an initial 15-bp hike in December 2021. The diversity of opinion stems from uncertainty over future energy prices “following the Government’s announcements of support measures including an Energy Price Guarantee,” which is expected to lower and bring forward the the expected peak of CPI inflation. On-year inflation was at 9.9% last month. The central bank base rate level now becomes 2.25%, a 14-year high. Officials were in better agreement regarding a plan to reduce gilt purchases by GBP 80 billion over the next 12 months.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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