London Daily

Focus on the big picture.
Wednesday, Mar 04, 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
Iran Conflict Strains U.S.–U.K. Alliance as Trump and Starmer Clash Over Military Strategy
UK Interest Rates Could Rise Above Four Percent Again if Energy Shock Continues, Think Tank Warns
Starmer Defends Britain’s Iran Strategy as Badenoch Urges Stronger Military Support
Labour MP Says She Saw No Sign Husband Broke Law After Arrest in China Espionage Investigation
UK Jobless Rate Overtakes Italy’s for First Time in Years as Labour Market Weakens
United Kingdom Suspends Student Visas for Four Countries in Unprecedented Immigration Move
Campaigners Warn UK Student Visa Ban Could Push Migrants Toward Dangerous Channel Crossings
First U.K. Charter Flight for Stranded Nationals Set to Depart Oman Amid Middle East Crisis
France and United Kingdom Deploy Warships to Eastern Mediterranean as Middle East Conflict Escalates
U.K. Arrests Three Men Including Lawmaker’s Partner in Suspected China Espionage Investigation
Trump Says UK–US ‘Special Relationship’ Is Diminished Amid Middle East Dispute
UK Economic Forecasts Face Fresh Strain from Middle East Conflict and Rising Energy Costs
UK Reaffirms Close US Ties After Trump’s Public Criticism
Reeves Stresses Stability and Fiscal Discipline in UK Budget Update as Growth Outlook Shifts
UK Deploys Royal Navy Destroyer HMS Dragon to Cyprus After Drone Strike on RAF Base
Green Party Surges Past Labour in New UK Poll as Traditional Party Support Crumbles
Majority of Britons Oppose U.S. Use of UK Military Bases in Iran Conflict
UK Intensifies Evacuation Efforts from Oman, Working with Airlines to Boost Flight Capacity
Trump Condemns UK and Spain in Unusually Sharp Rift Over Iran Military Action
Trump Repeats UK Claims That Diverge from Verified Facts Amid Diplomatic Strain
UK Arrests Prominent Figures Linked to Epstein Network as Questions Mount Over US Action
Trump Says UK ‘Took Far Too Long’ to Approve Use of Airbases for Iran Strikes
Scope of Britain’s Role in the Expanding Middle East Conflict Comes Under Scrutiny
Trump Says He Is ‘Very Disappointed’ in Starmer Over Iran Comments
U.S. Embassy in Riyadh Struck by Drones Amid Escalating Iran Conflict
Starmer Confronts Strategic Test After Drone Strike Near British Base in Cyprus
Rolls-Royce Chief Signals Openness to Germany Joining UK-Led Fighter Jet Programme
UK Stocks Slip as Escalating Iran Conflict Triggers Global Market Selloff
UK Overhauls Asylum System to Make Refugee Status Temporary
Starmer Warns of ‘Reckless’ Iranian Strikes Amid Escalating Regional Tensions
British Base in Cyprus Targeted as Drones Intercepted Amid Expanding Iran Conflict
Starmer Diverges from Trump on Iran Strategy, Rejects ‘Regime Change from the Skies’
U.S. and Israel Intensify Strikes on Iran as Conflict Expands to Lebanon and Gulf States
Violent Pro-Iranian Protesters Storm U.S. Consulate in Karachi
Missile Debris Sparks Fires at Dubai’s Jebel Ali Port Near Palm Jumeirah
Iran Strikes U.S. Fifth Fleet Headquarters in Bahrain Amid Wider Gulf Retaliation
When the State Replaces the Parent: How Gender Policy Is Redefining Custody and Coercion
Bill Clinton Denies Knowing Woman in Hot Tub Photo During Closed-Door Epstein Deposition
Former U.S. President Bill Clinton Testifies on Ties to Jeffrey Epstein Before Congressional Oversight Committee
Dyson Reaches Settlement in Landmark UK Forced Labour Case
Barclays and Jefferies Shares Fall After UK Mortgage Lender Collapse Rekindles Credit Market Concerns
Play Exploring Donald Trump’s Rise to Power by ‘Lehman Trilogy’ Author to Premiere in the UK
Man Arrested After Churchill Statue Defaced in Central London
Keir Starmer Faces Political Setback as Labour Finishes Third in High-Profile By-Election
UK Assisted Dying Bill Set to Fall Short in Parliament as Regional Initiatives Gain Ground
UK Defence Ministry Clarifies Position After Reports of Imminent Helicopter Contract
Independent Left-Wing Plumber Secures Shock Victory as Greens Surge in UK By-Election
Reform UK Refers Alleged ‘Family Voting’ Incidents in By-Election to Police
United Kingdom Temporarily Withdraws Embassy Staff from Iran Amid Heightened Regional Tensions
UK Government Reaches Framework Agreement on Release of Mandelson Vetting Files
×