London Daily

Focus on the big picture.
Monday, Apr 13, 2026

Bank of England on “collision course” with City over inflation and interest rates

Bank of England on “collision course” with City over inflation and interest rates

Some in the Square Mile want the Bank to move much more quickly as the economy recovers
The Bank of England looks increasingly at odds with the City over inflation and interest rates.

Some think the Old Lady of Threadneedle Street is on a collision course with the Square Mile, which fears rate setters are behind the economic curve.

This week the Bank’s Monetary Policy Committee meets to discuss interest rates and quantitative easing. No move in rates from record lows of 0.1% is remotely likely – it would be a shock if there were a shift.

And the Bank will probably hold its QE policy at £895 billion, ignoring calls from outgoing chief economist Andy Haldane to cut it by £50 billion.

Haldane has warned of the “beast of inflation” and thinks heat needs taking out of the economy right now.

The City is keen to at least see some sense of direction from the Bank about whether it might move interest rates before the US Federal Reserve does.

Inflation just hit 2.1%, going over the Bank of England’s 2% target for the first time in many months. Moreover, economists noted how quickly it seems to be rising, jumping from 1.5% previously.

Some think the Bank is too sanguine about inflation and should move interest rates up more quickly to head it off. So far, the Bank’s view – Haldane aside – has been that the recovery isn’t sufficiently embedded to take the risk of dampening consumer and business spending.

ING said in a note: “A recent speech by a normally-dovish committee member has sparked a debate on whether the Bank of England will hike rates in 2022, ahead of the Fed. We wouldn’t rule this out, though for now we’re in the camp looking for the first move in early 2023. Either way, we suspect policymakers will be keen to avoid offering new hints at Thursday’s meeting.”

The normally-dovish MPC member was Gertjan Vlieghe, who said last month that if the labour market proves stronger than expected rates could do up sooner than the City realises. Since then, most signs have employment – and most crucially, pay, well on the up.

The Bank of Canada is already talking about a rate hike in 2022, something that may give it first mover advantage among major economies emerging from the pandemic.

Last week the Fed was also hawkish, with observers now predicting it might move rates before the market expects.

Antoine Bouvet at ING said: “In reality, we don’t think the Bank will say anything particularly new on the timing of rate hikes at this next meeting…For now, we’re in the camp looking for the first-rate hike in 1Q23. We certainly wouldn’t rule out an earlier move though. Possible triggers could include a more rapid unwinding of household savings, given the economic outlook is particularly sensitive to even small percentage changes in the amount of the savings stockpile that is spent (the BoE assumes roughly 10%). Wage growth is also key, and there are already anecdotal reports of firms facing shortages of staff in hospitality, though our feeling is that this is likely to prove temporary.”

So the consensus remains that inflation spikes will be short-lived, but interestingly even economists sure of that are increasing their predictions for how high it will go.

Capital Economics now says it will peak at 2.9% later this year, up from a 2.6% forecast previously.

Even if this turns out to be right, there is a growing view that the Bank should at least signal that the crisis is past by moving rates up from extraordinary lows of 0.1%.

A move to 0.25% or 0.5% would still leave borrowing costs extremely low. If further economic woes emerge, the Bank would at that point at least have something to cut.

The MPC rules on Thursday. The City is watching with more than usual interest.
Newsletter

Related Articles

0:00
0:00
Close
Meghan Markle Plans Exclusive Women-Focused Retreat During Australia Visit
Starmer and Trump Hold Strategic Talks on Securing Strait of Hormuz Amid Rising Tensions
Unofficial Australia Visit by Prince Harry and Meghan Expected to Stir Tensions with Royal Circles
Pipeline Attack Cuts Significant Share of Saudi Arabia’s Oil Export Capacity
UK Stocks Rise on Ceasefire Momentum and Renewed Focus on Diplomacy
UK to Hold Further Strategic Talks on Strait of Hormuz Security
Starmer Voices Frustration as Global Tensions Drive Up UK Energy Costs
UK Students Voice Concern Over Proposal for Automatic Military Draft Registration
Rising Volatility Drives Uncertainty in UK Fuel and Petrol Prices
UK Moves to Deploy ‘Skyhammer’ Anti-Drone System to Strengthen Airspace Defense
New Analysis Explores UK Budget Mechanics in ‘Behind the Blue’ Feature
Man Arrested After Four Die in Channel Crossing Tragedy
UK Tightens Immigration Framework with New Sponsor Rules and Fee Increases
UK Foreign Secretary Highlights Impact of Intensified Strikes in Lebanon
UK Urges Inclusion of Lebanon in US-Iran Ceasefire Framework
UK Stocks Ease as Ceasefire Doubts in Middle East Weigh on Investor Confidence
UK Reassesses Cloud Strategy Amid Criticism Over Limited Support Measures
UK Calls for Full and Toll-Free Access Through Strait of Hormuz Amid Rising Tensions
Starmer Signals Strategic Shift for Britain Amid Escalating Iran-Linked Tensions
UK Issues Firm Warning to Russia Over Covert Underwater Military Activity
OpenAI Halts Stargate UK Project, Casting Uncertainty Over Britain’s AI Expansion Plans
Starmer Voices Frustration Over Global Pressures Driving UK Energy Costs Higher
UK Deploys Military Assets to Protect Undersea Cables From Suspected Russian Threat
Canada Aligns With US, UK and Australia as Europe Prepares Major Digital Border Overhaul
Meghan Markle’s Planned Australia Appearance Sparks Fresh Speculation
Starmer Warns Sustained Effort Needed to Ensure US–Iran Ceasefire Holds
UK to Partner with Shipping Industry to Rebuild Confidence in Strait of Hormuz, Cooper Says
UK Interest Rate Expectations Ease Following US–Iran Ceasefire Agreement
Starmer Signals Major Effort Needed to Fully Reopen Strait of Hormuz During Gulf Visit
UK Fuel Prices Face Ongoing Volatility Amid Global Pressures and Domestic Factors
Kanye West’s Planned Italy Festival Appearance Draws Debate After UK Entry Ban
Smuggling Routes Shift Toward Belgium as Migrant Crossings to UK Evolve
Ceasefire Offers Potential Relief for UK Fuel and Food Prices Amid Ongoing Uncertainty
Iran Conflict Raises Questions Over UK’s Global Influence and Military Preparedness
Senator McConnell Visits Kentucky to Highlight Federal Investment in Local Projects
Kanye West Barred from Entering UK as Legal Grounds Come into Focus
UK Denies Visa to Kanye West After Sponsors Withdraw from Wireless Festival
Trump-Era Forest Service Restructuring Leads to Closure of UK Lab Focused on Kentucky Woodland Health
Foreign Students in the UK Describe Harsh Living Conditions and Financial Pressures
Reform UK Proposes Visa Restrictions on Nations Pursuing Reparations Claims
Public Reaction Divides Over UK Decision to Bar Kanye West
Calls Grow for UK to Review US Base Access Following Concerns Over Escalating Rhetoric
UK Indicates It Will Not Permit Use of Its Bases for Potential US Strikes on Iran’s Energy Infrastructure
UK Prime Minister Defends Decision to Bar Kanye West, Questions Festival Booking
UK Accelerates Efforts to Harmonise Medical Technology Rules with United States
Wireless Festival Cancelled After Kanye West Denied Entry to the United Kingdom
Australia’s most decorated living soldier was arrested at Sydney Airport and charged with five counts of war-crime murder for the killing of unarmed Afghan civilians
The CIA’s Secret Technology That Can Find You by Your Heartbeat Successfully Locates Downed Airman
Operation Europe: Trump Deploys Vance to Hungary to Save the EU
King Charles Faces Criticism From Some UK Christians Over Absence of Easter Message
×