London Daily

Focus on the big picture.
Monday, Jun 22, 2026

Bank of England rate hike supporter gets Omicron jitters as firms face 'strongest inflation pressures for 23 years'

Bank of England rate hike supporter gets Omicron jitters as firms face 'strongest inflation pressures for 23 years'

Michael Saunders indicates he could withdraw his support for a rate rise this month as the new COVID variant threatens to inflict more damage on the UK and wider global economy.

A member of the Bank of England committee which sets interest rates has backtracked on his support for a hike, saying he first wants to see data on how the new Omicron COVID variant affects the UK's economic recovery.

Michael Saunders warned that a delay in raising rates could result in a more painful tightening being required later but indicated he was yet to make up his mind on how he would vote later this month.

He spoke out as a closely-watched survey covering the UK's powerhouse services sector showed the strongest inflation pressures in at least 23 years.

The IHS Markit/CIPS Purchasing Managers' Index (PMI) showed costs paid by services companies and prices they charged to customers hit their highest levels since records started in 1998 amid pandemic-related supply chain disruption.

Former Citi economist Michael Saunders is an external member of the MPC


However, and crucially, it said there was little evidence yet that the surging costs were doing much to dent consumer and business demand.

Mr Saunders told an audience that "the pace, and scale, of any monetary policy changes will depend on economic developments and the outlook".

He made his remarks just a month after being outvoted on the need for a hike in rates on the nine-member monetary policy committee (MPC) to dampen inflation expectations.

Then, the former Citi economist was joined by the Bank's deputy governor Dave Haskell in pushing for a rise in Bank rate to 0.25% from its current COVID-19 crisis low of 0.1%.

The other seven MPC members, including governor Andrew Bailey, held back - preferring to wait for further economic data.

The outcome shocked financial markets that had priced in a rate rise based on earlier comments by Mr Bailey who had spoken of the need to take action.

He has made noises since about doing away with guidance on the likely path of rates ahead of the Bank's next MPC meeting.

The markets believe a rate increase is the most likely outcome on 16 December but economists are not convinced - largely based on the fact that raising the cost of borrowing could be counterproductive.

Mr Bailey has argued that a rate rise will do little to ease prices that are outside its control - such as energy costs - and these will ease naturally and are therefore "transitory" in nature.

However, following a leap in the rate of inflation to a decade-high level of 4.2%, the governor is under pressure to follow his US counterpart and admit inflation is likely to be more sticky for longer.

Market expectations that the US could start raising rates to combat the problem earlier than anticipated were quickly dashed on Friday when it emerged that the world's largest economy created less than half the number of new jobs expected last month.

The MPC will have the latest inflation and wage data before it when it makes its next call on rates.

Mr Bailey is most fearful that talk of rising inflation will create an imbalance as wage demands rise to meet it - making the Bank's 2% inflation target more difficult to achieve in the medium term.

Tim Moore, economics director at IHS Markit, said: "Surging price pressures have done little to dent business and consumer spending across the UK economy, according to the latest PMI data.

"New order growth hit a five-month high in November, job creation remained strong, and backlogs of work built up due to supply issues.

"The overall speed of recovery looks to have accelerated in comparison to the third quarter of 2021, with output growth mostly driven by services as manufacturers struggle with severe shortages of raw materials and critical components."

Newsletter

Related Articles

0:00
0:00
Close
UK Expands Alcohol Ban Enforcement Using Tagging Technology Ahead of World Cup
UK Invests £50 Million in Critical Minerals Supply Chain Security
UK Appoints Special Envoy on Preventing Sexual Violence in Conflict
UK Introduces Fines for Landlords of Unsafe Rental Properties
Reform UK Leads Opinion Polls as Immigration Debate Reshapes UK Politics
Police Investigate Edinburgh Attacks as Potential Hate Crimes
King Charles to Publish Personal Tax and Royal Household Financial Records
Nottingham University Hospitals Maternity Inquiry Report Set for Publication
Heat-Health Alerts Issued Across London and Southern England Amid Rising Temperatures
UK Economy Shows Pressure From Middle East Conflict Despite Modest Growth
Brexit Anniversary Reignites Debate Over UK Economic and Political Direction
UK Parliament Continues Legislative Work Amid Leadership Transition
Financial Markets Hold Steady After UK Leadership Shake-Up
Andy Burnham Enters Labour Leadership Race With Strong Parliamentary Backing
Keir Starmer Resigns as UK Prime Minister After Two Years in Office
Reform UK MP Lee Anderson to Raise Pension Concerns Over British Coal Staff Superannuation Scheme
UK Parliament to Debate Newborn Screening for Spinal Muscular Atrophy Following Public Petition
Met Office Warns of Water Safety Risks During Heatwave as Temperatures Peak in England
Treasury Increases Mileage Allowance Payments for 2026–27 Tax Year to 55 Pence Per Mile
UK Government Raises Electricity Generator Levy to 55 Percent in New Revenue Measure
House of Lords Moves Financial Services and Markets Bill to Committee Stage Amid Regulatory Scrutiny
Westminster Hall to Debate Petition on Pro-Israel Influence in UK Politics
UK Parliament Prepares for Estimates Days Debates as Backbench Business Schedule Approved
Armed Forces Bill Nears Final Stages in UK House of Commons With Military Justice Reforms
Donald Trump Comments on UK Political Situation, Citing Immigration and Energy Policy Concerns
Andy Burnham By-Election Victory Fuels Speculation Over Potential Labour Leadership Contest
UK Economy Shows Resilience but Faces Headwinds from Middle East Tensions, UK Finance Says
UK Parliament Opens Week of Debates on Net Zero, Security and Armed Forces Reform
Met Office Issues Amber Extreme Heat Warning as Temperatures Expected to Reach 35C Across England and Wales
Prime Minister Keir Starmer Faces Mounting Leadership Pressure After Makerfield By-Election Defeat
London Hotel Wins World’s Best Afternoon Tea Award at International Hospitality Guide La Liste
Court of Appeal Rules in Favour of Competition and Markets Authority in Phenytoin Drug Case
Chichester Waste Site Suspended After Environment Agency Finds Serious Fire and Pollution Risks
UK Appoints Chris Elmore as Special Envoy on Preventing Sexual Violence in Conflict
Environment Agency Fines Yorkshire Firms Nearly £470,000 for Environmental Permit Breaches
British Chambers of Commerce Says Post-Brexit Trade Deals Have Limited Economic Impact
Resident Doctors to Vote on Government Pay Offer in Ongoing NHS Dispute
UK Public Borrowing Reaches £46.3 Billion in Early Fiscal Year, Driven by Debt Interest Costs
UK Government Unveils £100 Million Package to Strengthen Fire and Rescue Response Capacity
Bank of England Holds Interest Rates at 3.75 Percent Despite Easing Inflation
Met Office Extends Amber Heat Warning as Temperatures Forecast to Reach 38C Across Southern England
Prime Minister Keir Starmer Expected to Resign Amid Mounting Labour Party Pressure
UK Government Tightens Procurement Rules to Prioritise National Security and Supply Chain Resilience
National Drought Group Reviews Water Supply Risks After Dry Spring and Ongoing Heatwave
Andy Burnham Faces Leadership Speculation After Weak Local Election Results for Labour
Charity Commission Appoints Interim Managers to Barnabas Aid Amid Financial Investigation
Government Awards £27 Million Leonardo UK Contract to Maintain Military Aircraft Fleet
Environment Agency Suspends Chichester Waste Site Permit Over Fire and Pollution Risks
Border Force Seizes Record Cannabis Shipment in Major UK Criminal Network Disruption
Lloyds Banking Group to Hire 300 Artificial Intelligence Specialists in Digital Expansion Push
×