The Monetary Policy Committee (MPC) voted 8\u20131 to keep Bank Rate unchanged, with Chief Economist Huw Pill voting for a rise to 4%.<\/p>\n
Inflation has increased to 3.3% and is likely to move higher later this year, driven mostly by disruption to global energy supplies following the war in the Middle East.<\/p>\n
Governor Andrew Bailey told the BBC: \u201cWhere we go from here will depend on the size and duration of the energy price shock.\u201d<\/p>\n
The Bank expects higher energy costs to feed through into household bills and business costs, with knock-on effects on prices and wages. It warned that there is a risk that inflation becomes more persistent if firms pass on higher costs and workers seek pay increases to offset rising living expenses.<\/p>\n
However, policymakers also pointed to a weakening domestic backdrop, with a loosening labour market and softer economic growth helping to limit inflationary pressures. The MPC said it would act to ensure that higher inflation does not become embedded.<\/p>\n
Bailey stressed the difficulty of predicting the path ahead given recent volatility in energy markets. \u201cYou look at the oil price curve, it went up, then you had a period where it was coming back down again, and now it’s gone back up again. We have to be quite careful here.\u201d<\/p>\n
The Bank outlined three potential scenarios for the UK\u2019s economy. In a more stable outcome, energy prices fall back and inflation peaks at around 3.6% before later easing. In the next scenario, inflation remains elevated for longer. In the worst-case scenario, where oil stays above $120 a barrel, inflation could rise above 6% and prompt a series of rate increases.<\/p>\n
The Bank did not assign probabilities to any of the potential outcomes, but Bailey indicated that the middle path of more persistent inflation was currently the most likely.<\/p>\n
Rising energy costs are also expected to push up food prices, with higher fertiliser costs linked to the same geopolitical tensions. The Bank said it could mean food inflation could rise to around 4.6% by September, with some analysts suggesting it could reach 6\u20137% later in the year.<\/p>\n
The impact is already being felt in household finances. The Bank said a typical annual energy bill could rise from \u00a31,641 to close to \u00a31,900 in July, depending on the price cap, while mortgage borrowers coming off fixed deals are expected to see average monthly payments increase by around \u00a380 over the next three years.<\/p>\n
The decision to hold rates, however, does not signal a shift in direction. The Bank said monetary policy cannot influence global energy prices but must ensure that the effects do not lead to sustained inflation.<\/p>\n
Bailey said, though, that he could not give a \u201ccast iron assurance\u201d that rates would not rise, even if energy prices begin to fall.<\/p>\n
Markets are expected to remain sensitive to developments in energy prices and inflation over the coming months, with the Bank indicating it will monitor conditions closely and will respond as needed in order to return inflation to its 2% target.<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
The Bank of England has held interest rates at 3.75% for a third consecutive meeting, but warned that further increases may be needed as inflation and energy prices come under pressure. The Monetary Policy Committee (MPC) voted 8\u20131 to keep Bank Rate unchanged, with Chief Economist Huw Pill voting for a rise to 4%. Inflation… Read more »<\/a><\/p>\n","protected":false},"author":4233,"featured_media":6107628,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[59,179,4,26],"tags":[],"class_list":["post-6107625","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-trending-news","category-expert-advice","category-investment","category-tax-mortgages-money"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts\/6107625","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/users\/4233"}],"replies":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/comments?post=6107625"}],"version-history":[{"count":2,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts\/6107625\/revisions"}],"predecessor-version":[{"id":6107627,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts\/6107625\/revisions\/6107627"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/media\/6107628"}],"wp:attachment":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/media?parent=6107625"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/categories?post=6107625"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/tags?post=6107625"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}