London Daily

Focus on the big picture.
Monday, Sep 15, 2025

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
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
Elon Musk Retakes Lead as World’s Richest After Brief Ellison Surge
U.S. and China Agree on Framework to Shift TikTok to American Ownership
London Daily Podcast: London Massive Pro Democracy Rally, Musk Support, UK Economic Data and Premier League Results Mark Eventful Weekend
This Week in AI: Meta’s Superintelligence Push, xAI’s Ten Billion-Dollar Raise, Genesis AI’s Robotics Ambitions, Microsoft Restructuring, Amazon’s Million-Robot Milestone, and Google’s AlphaGenome Update
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Musk calls for new UK government at huge pro-democracy rally in London, but Britons have been brainwashed to obey instead of fighting for their human rights
Elon Musk responds to post calling for the murder of Erika Kirk, widow of Charlie Kirk: 'Either we fight back or they will kill us'
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
USA: Office Depot Employees Refused to Print Poster in Memory of Charlie Kirk – and Were Fired
Proposed U.S. Bill Would Allow Civil Suits Against Judges Who Release Repeat Violent Offenders
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
French Debt Downgrade Piles Pressure on Macron’s New Prime Minister
US and UK Near Tech, Nuclear and Whisky Deals Ahead of Trump Trip
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
Anesthesiologist Left Operation Mid-Surgery to Have Sex with Nurse
Tens of Thousands of Young Chinese Get Up Every Morning and Go to Work Where They Do Nothing
The New Life of Novak Djokovic
The German Owner of Politico Mathias Döpfner Eyes Further U.S. Media Expansion After Axel Springer Restructuring
Suspect Arrested: Utah Man in Custody for Charlie Kirk’s Fatal Shooting
In a politically motivated trial: Bolsonaro Sentenced to 27 Years for Plotting Coup After 2022 Defeat
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Turkish authorities seize leading broadcaster amid fraud and tax investigation
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
ChatGPT CEO signals policy to alert authorities over suicidal youth after teen’s death
The British legal mafia hit back: Banksy mural of judge beating protester is scrubbed from London court
Surpassing Musk: Larry Ellison becomes the richest man in the world
Embarrassment for Starmer: He fired the ambassador photographed on Epstein’s 'pedophile island'
Manhunt after 'skilled sniper' shot Charlie Kirk. Footage: Suspect running on rooftop during panic
Effective Protest Results: Nepal’s Prime Minister Resigns as Youth-Led Unrest Shakes the Nation
Qatari prime minister says Netanyahu ‘killed any hope’ for Israeli hostages
King Charles and Prince Harry Share First In-Person Moment in 19 Months
Starmer Establishes Economic ‘Budget Board’ to Centralise Policy and Rebuild Business Trust
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Brazilian police say ex-President Bolsonaro had planned to flee to Argentina seeking asylum
Trinidad Leader Applauds U.S. Naval Strike and Advocates Forceful Action Against Traffickers
Kim Jong Un Oversees Final Test of New High-Thrust Solid-Fuel Rocket Engine
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Supreme Court temporarily allows Trump to pause billions in foreign aid
Charlie Sheen says his father, Martin Sheen, turned him in to the police: 'The greatest betrayal possible'
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
Pig Heads Left Outside Multiple Paris Mosques in Outrage-Inducing Acts
Nvidia’s ‘Wow’ Factor Is Fading. The AI chip giant used to beat Wall Street expectations for earnings by a substantial margin. That trajectory is coming down to earth.
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
×