London Daily

Focus on the big picture.
Saturday, Jun 27, 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
Thames Water and Energy Operators Warn of Peak Demand Risks During UK Heatwave
Government Conference Highlights Push for Evidence-Led Policy Across UK Public Sector
Insolvency Service Reports Improved Confidence in UK Insolvency System
Security Industry Authority Finds Widespread Safety Failures in UK Night-Time Economy
Nigel Farage Expands Anti-WHO Campaign Into United States With New Lobbying Structure
Home Secretary Seema Mahmood Unveils New Safe Routes Plan for Asylum Seekers
UK Government Warns of Peak Electricity and Water Pressure Amid Ongoing Heatwave
New Nuclear Plant in Wales Named Gwyndod Power Station as Energy Strategy Advances
UK Announces First Major Hydropower Projects in Four Decades to Expand Renewable Capacity
Thirteen Men Charged in Major UK Sexual Abuse Case as Investigation Continues
UK Launches Cross-Sector Climate Security Taskforce Linking Environment and National Security
UN Secretary-General António Guterres Calls for Urgent Global Methane Emissions Cuts in London
World Bank Approves $1 Billion UK-Backed Financing Package for Ukraine Recovery
UK Pledges Emergency Aid and Rescue Team Deployment to Earthquake-Hit Venezuela
Bank of England Holds Interest Rates at 3.75 Percent for Fourth Straight Meeting
Record-Breaking Heatwave Puts Strain on UK Health Services and Energy Networks
London Ambulance Service Sees Record Emergency Demand as Heatwave Intensifies
British Chambers of Commerce Warns of Prolonged Weak Investment Climate Through 2027
Bank of England Holds Interest Rates as Inflation Risks Persist
UK Construction Sector Faces One Percent Contraction Amid Cost and Investment Pressures
Former DUP Leader Sir Jeffrey Donaldson Convicted of Sexual Offences
Church of England Appoints Dr Linsay Cunningham to Lead Faith and Public Life Division
UK Armed Forces Day Marked Nationwide With Events From Aberdeen to the Scilly Isles
Rising Tensions in Edinburgh Prompt Joint Warning From Scottish Local Government Leaders
UK Construction Sector Forecast to Contract One Percent in 2026 on Cost Pressures
UK Parliament Backs 87 Percent Emissions Cut as Government Deepens Electrification Drive
British Chambers of Commerce Forecast Weak UK Growth as Investment and Demand Slow
Bank of England Holds Interest Rates at 3.75 Percent Amid Energy and Inflation Uncertainty
London Ambulance Service Reports Record Surge in Life-Threatening Emergency Calls During Heatwave
UK Parliament Approves Legally Binding 87 Percent Emissions Cut Target by 2040
United Kingdom Records Third Consecutive Day of Record June Heat as Europe Faces Worsening Heatwave
Robert Jenrick Defends £5 Million Donation to Nigel Farage Amid Political Scrutiny
Plymouth Museum The Box Wins 2026 Art Fund Museum of the Year Award
UK Government Faces Backlash Over Plans to Use Former Military Sites for Asylum Accommodation
Labour Party Faces Pressure Over Cabinet Stability as Senior Figures Clash on Policy Direction
Heathrow Airport Forecasts Passenger Decline in 2026 as Costs and Climate Disruption Mount
UK Energy Regulator Approves Expansion of Long-Duration Storage to Boost Power System Resilience
Crown Estate Reports Third Consecutive Year of £1 Billion Profit as Debate Over Royal Finances Intensifies
Teenager Charged With Murder in Wales Following Death of 14-Year-Old Boy
Nottingham University Hospitals Maternity Failures Trigger Calls for Public Inquiry Into Patient Safety
EasyJet Rejects £4.9 Billion Takeover Offer From Castlelake but Keeps Door Open for Further Talks
Record Heatwave Triggers UK Transport and Infrastructure Strain as Heathrow Revises Passenger Forecast Downward
Ofgem Approves Sixteen Long-Duration Energy Storage Projects to Strengthen UK Grid Stability
Labour Government Faces Internal Tensions Over Cabinet Decisions and Net Zero Policy Direction
British Food and Drink Exports Fall to Decade Low Amid Trade Friction and US Tariffs
Great Britain Grid Operator Spends £10 Million to Stabilize Electricity Supply During Heatwave Demand Surge
UK Parliament Committee Calls for Urgent National Adaptation Strategy as Extreme Heat Strains Public Infrastructure
Record-Breaking Heatwave Pushes England’s National Health Service to Critical Incident Status as Hospitals Struggle With Surge in Emergencies
UK Government Launches Review of Voluntary National Insurance Contributions System
UK Planning Inspectorate Reports Key Infrastructure and Planning Milestones in Annual Review
×