London Daily

Focus on the big picture.
Sunday, Aug 09, 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
Patients Turn to Artificial Intelligence for Therapy as Psychiatrists Warn of Privacy and Clinical Risks
Couples Embrace ‘Sleep Divorce’ to Protect Rest and Reduce Tension
Meta Ordered to Pay $567 Million and Change Facebook and Instagram Safeguards for Children
Up to only 10 Months in Prison for Swedish Officer’s Murderer Sparks Anger
Success: Nvidia Turned Gaming Chips Into the Engine of the AI Boom
Jorge Messi, Lionel Messi’s Father and Longtime Agent, Dies at 68
AI’s Next Bottleneck Is Power, Not Just Nvidia Chips
Advertising trick: Pepsi’s Harrier Jet Commercial Led to a $700,000 Court Fight
Hyper-Realistic Reborn Dolls Draw Collectors Seeking Comfort and Craft
Gen Z Cuts Back on Dating as a Night Out Nears $200
Meta Raises AI Spending Target to as Much as $145bn Despite Pressure Over Returns
Danube Drought Exposes Nazi Wrecks and Pushes Central Europe’s Power System to the Brink
Joe Biden’s Cancer Has Spread Beyond His Bones, Hunter Biden Says
Air Traffic Control Outage Grounded Flights Across the Midwest
Why 2027 Could Be a Strong Year for Stocks—and Why the Forecast Is Fragile
Why Markets May Look Quiet in August After Big Tech Earnings
Partial Solar Eclipse Expected to Draw Interest Across Southwestern UK
UK Graduate Job Postings Fall 7% as Entry-Level Opportunities Remain Scarce
UK Private Sector Returns to Growth as July Activity Reaches Highest Level Since April
UK Summer Drought and Wildfires Raise Pressure for Stronger Environmental Measures
UK Household Credit Stress Rises as Credit Card Lending Growth Hits 12.5%
London Stock Exchange Revises AIM Rules to Make Growth Capital More Accessible
NHS England to Expand Mental Health Services With 155 New and Upgraded Facilities
UK Overhauls £90 Billion Public Procurement System to Reward Domestic Jobs and Apprenticeships
Andy Burnham Holds Strong Approval as Labour Maintains Narrow Lead Over Reform UK, Opinium Finds
Royal Navy Monitored Russian Warships and Shadow Fleet Tankers for 21 Days in July
Australian Crew Evacuates Seriously Ill American From Antarctica in Midwinter Darkness
Trump’s Top General Seeks an Exit Strategy From Iran War, Report Says
Brock Lesnar Retires From Wrestling, Closing a Career of Rare Athletic Range and Lasting Controversy
Welsh First Minister Raises Independence With UK Prime Minister in First High-Level Call
UK Maintains Severe Terror Threat Level as Prevent Report Highlights Online Radicalization
YouGov Poll Shows Labour Favourability Improves as Reform UK and Greens Lose Ground
Brexit Campaigner Arron Banks Admits Hiring Private Investigator to Examine Journalist
Robert Jenrick Leaves Conservatives for Reform UK in Major Parliamentary Defection
July 2026 Was England and Wales’ Driest Month on Record, Met Office Says
UK Government Considers Public Inquiry Into Jeffrey Epstein’s UK Connections
Trump-Era Policy Shifts Test the Boundaries of U.S. Institutions
UK Drought Cuts Harvests and Raises Food-Security Fears
UFO: Pentagon Releases Video of Unidentified Object Tracked Over Middle East
US Health Secretary: “I’m Not Afraid of Germs — I Used to Snort Cocaine Off Toilet Seats”
Ukraine Tells Senate Republicans Its Drone War Offers a Blueprint for America
Weight-Loss Drug Boom Tests the Limits of Prescription Advertising Rules
Trump Keeps Hegseth at Pentagon While Leaving Door Open for DeSantis
UK Clears Paramount’s Warner Bros. Discovery Deal, but US Trial Looms
UK Prosecutors Add 38 Charges Against Andrew and Tristan Tate
Taiwan’s President Joins Wartime Command Drill as China Pressure Grows
Saudi Arabia, Turkey and Pakistan Sign Mutual-Defence Pact
Government Orders Review of Prison Release Rules After Concerns Over Grooming Gang Offenders
Rail Disruption Continues Across North-West England Amid Infrastructure Problems and Engineering Closures
UK Tax Authority Proposes Broad Changes to Rules Governing Company Distributions
×