London Daily

Focus on the big picture.
Saturday, Sep 05, 2026

Bank of England’s rate decision leaves many economists gasping for air

Bank of England’s rate decision leaves many economists gasping for air

Analysis: decision to keep rates on hold is not unpopular but governor’s signalling is roundly criticised
It is “compulsory for the Bank of England governor to be an unreliable boyfriend”, Andrew Bailey joked during a press conference to explain why the central bank he runs kept interest rates on hold when action of some kind was expected.

As quips go, it fell flat in financial markets, where currency traders sold the pound, knocking more than 1% from sterling’s value against the US dollar.

It also left many economists gasping for air as the full implications of Bailey’s refusal to turn up to his own party began to sink in. He had stressed last month that monetary policy “will have to act” if there is a risk of inflation. Those words were not followed by action on Thursday, despite the rising wages and prices.

Gerard Lyons, a former candidate for governor and a former adviser to Boris Johnson, described the governor’s signalling as “appalling”, adding that by not correcting how the market or the media interpreted his comments he encouraged “hawkish expectations ahead of this meeting that was not merited by the recent data”.

Lyons went on to say the bank needed to learn from the US Federal Reserve, “to be on top of the data” and “guide” the market.

He is not the only commentator to offer a disparaging comparison of the Bank of England’s public relations to those of the Fed, or the Bank of Japan and the European Central Bank, where the path of interest rates is clearly mapped out.

The decision itself was not unpopular. A rise in interest rates, said one analyst, could push the UK into a recession next year, such is the weakening outlook. GDP growth is slowing, consumer confidence is falling and trade figures are weak following Brexit.

The MPC seemed to follow this line of argument in its latest quarterly health check, despite forecasting a rise in inflation to a fresh peak of 5% in the new year.

While monetary policy would have no impact on rising gas prices and a spike in the cost of oil, which were global problems hitting all countries, there were still worries about domestic price pressures, mostly from the cost of labour.

The committee had hoped there would be some information indicating how many had joined the dole queue and how many were kept on by their employer; and if they were kept on, was their position still full-time or part-time.

Unable to divine how strong the outlook is for jobs and wage rises over the longer term, they sat on their hands in the hope of a clearer picture emerging “in the coming months”.

This phrase was widely interpreted as meaning an interest rate rise in December or February next year. The downbeat economic forecast meant maybe one or two more rises may follow in 2022.

Martin Beck, chief economic adviser to the EY Item Club, said a base rate of 0.5% in a year was the most the markets can reasonably expect.

Paul Dales, at the consultancy Capital Economics, summed up the Bank’s position: “So the MPC is gearing up to raise rates because the economic outlook is stronger than when it cut rates to 0.1% in March 2020 and because it wants to send a signal that it is not going to let inflation stay above the 2% target for very long.

“But equally, it is aware that the economy is still fragile and wants to send a signal that it won’t raise rates too far, too soon.”

Speculators will feel bruised. However, they should know that the MPC has been here before, talking tough only to concede meekly that the UK economy is essentially weak and in need of ultra-low interest rates to maintain growth.

It was how the former governor, Mark Carney, gained his “unreliable boyfriend” nickname. It may stick to Andrew Bailey too.
Newsletter

Related Articles

0:00
0:00
Close
UK Urges Households to Keep Emergency Supplies Amid Severe El Niño Warning
Prime Minister Andy Burnham Sets Out Regional Industry and Prison Reform Agenda
Siemens Energy Wins Rolls-Royce Small Modular Reactor Manufacturing Contract
UK Mortgage Costs Rise as Gilt Yields and Swap Rates Climb
Bank of England’s Huw Pill Calls for Prompt Rate Rise as Inflation Risks Persist
National Audit Office Warns UK Is Unprepared for Major Food Supply Disruptions
British Army Suspends Some Training Exercises as Budget Pressures Intensify
HMS Queen Elizabeth Deploys as NATO Allied Response Force Command Ship
Reform UK Suspends Two Senior Officials Over Alleged Foreign Donation Scheme
UK Reasserts Falkland Islands Sovereignty After Argentina Threatens Sanctions
Scottish Tech Company PureLifi Enters Administration With More Than 40 Job Losses
Scottish Government Names Alyn Smith Innovation and Education Minister
Green Party Co-Leader Zack Polanski to Contest By-Election for Keir Starmer’s Former Seat
Palestine Action Activists Appeal Terrorism-Related Prison Sentences
PwC Report Highlights Persistent Regional Spending-Power Divide Across Britain
UK Names Hundreds of Employers for Minimum Wage Violations
UK Commits £400 Million to International Tropical Forest Fund
UK Extends £2 Bus Fare Cap Across England Through 2027
UK Warns Travellers as US-Iran Tensions Disrupt Middle East Security and Shipping
Andy Burnham Faces Kemi Badenoch in First Prime Minister’s Questions
Kemi Badenoch Names Andrew Griffith Shadow Chancellor in Conservative Reshuffle
UK Treasury and Markets Focus on Fiscal Headroom Ahead of Autumn Budget
UK Government Reverses Early Release Plans for Serious Violent and Sexual Offences
UK and France Review Border Cooperation After 48,000 Small-Boat Crossings Prevented
UK Growth Outlook Weakens as Inflation and Energy Costs Rise
Breeding Tropical Mosquitoes Discovered in East London
Sadiq Khan Agrees to Search of Digital Communications in Palantir Lawsuit
Scottish Protesters Call for Moratorium on AI Data Centre Expansion
Uber Drivers Bring London Class Action Over Algorithmic Management
Reform UK Accepts £4 Million Donation From Cryptocurrency Billionaire Pardoned by Trump
Justice Secretary Tightens Early Release Scheme to Exclude Manslaughter Offenders
Kemi Badenoch Reshuffles Conservative Team as Reform UK Pressure Grows
British Mortgage Rates Rise as Global Bond Sell-Off Pushes Up Borrowing Costs
UK Records Hottest Summer on Record in 2026
UK Government Urges Households to Stock Essential Supplies Ahead of Severe El Niño Risk
UK Prepares Targeted Sanctions Over Israeli Settlements in West Bank
Reform UK Faces Electoral and Police Scrutiny Over Foreign Donation Allegations
UK and France Expand Channel Migration Cooperation as Trade Tensions Surface
UK Marks Merchant Navy Day With Tribute to Civilian Seafarers
Burnham Pays Tribute to Two Police Officers Killed on Duty in Northern England
Booking.com Left Fake Downing Street Listing Online for Two Months, Which Says
Burnham and Macron to Review UK-France Cooperation on Channel Crossings
UK Business Confidence Improves Slightly but Investment Concerns Persist
Burnham Faces Pressure Over Future North Sea Oil and Gas Licences
Burnham Pushes Wider English Devolution Through ‘Number Ten North’
British Chambers of Commerce Raises 2026 UK Growth Forecast to 1%
Keir Starmer Resigns as Holborn and St Pancras MP, Triggering By-Election
UK Chancellor Faces Tighter Budget Headroom as Long-Term Borrowing Costs Rise
UK Government Weighs Thames Water Nationalisation as Financial Crisis Deepens
Prime Minister Andy Burnham Faces First Commons Questions Over Tax and Spending Plans
×