London Daily

Focus on the big picture.
Thursday, Sep 10, 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
Buckingham Palace Says Prince Harry and Meghan Will Not Resume Official Royal Duties
UK Treasury Faces Calls to Scrap £100,000 Childcare Support Threshold
Trades Union Congress Urges Labour Government to Rewrite Migration Policy
Riot Police Deployed After Anti-Migrant Protests Turn Violent in Portsmouth
UK Considers Replacing Some Disability Cash Payments With Direct Services
JPMorgan’s Jamie Dimon Warns UK Chancellor Against Higher Banking Taxes
UK Announces New Sanctions Targeting Israeli Settlements in West Bank
Metropolitan Police Investigate Alleged Illegal Donations to Reform UK
UK Charges Wiltshire Man With Assisting Russian Intelligence
UK Orders Urgent Review After Air Traffic Failure Cancels More Than 2,000 Flights
Merz Rebukes AfD Expansion in Saxony-Anhalt
King Charles Confirms Prince Harry and Meghan Will Remain Private Citizens
Labour Selects Former Child Refugee for By-Election in Keir Starmer’s Former Seat
Foreign Private Equity Accelerates Takeovers of London-Listed Industrial Companies
NHS Maternity Care Faces Scrutiny Over Support for Mothers After Caesarean Births
BBC Warns Staff Strikes Are Likely Amid Job Cuts and Programme Cancellations
English Housing Affordability Improves to Best Level in More Than a Decade
UK Health Commission Proposes Framework for Wider AI Adoption Across NHS
Labour Faces Pressure for Wealth Tax Ahead of Autumn Budget
Metropolitan Police Open Criminal Investigation Into Alleged Foreign Donations to Reform UK
UK Police Deploy Riot Officers After Anti-Immigration Unrest in Portsmouth and Dover
UK Defends Sanctions on Israeli Settlements Despite Diplomatic Retaliation
UK Air Traffic Control Failure Cancels More Than 1,000 Flights and Disrupts 65,000 Passengers
Compass Urges £10 Million Wealth Tax and Public Ownership Ahead of UK Autumn Budget
UK Government’s Devolution Plans Face House of Lords Scrutiny
Maldives Seeks New Chagos Sovereignty Talks With UK Prime Minister Andy Burnham
UK Airports Face Continuing Disruption After National Air Traffic Control Failure
UK Bans Imports From Israeli Settlements and Expands Sanctions on Iran
British Chambers of Commerce Forecasts UK Growth of 1% as Investment Remains Weak
UK Suspends Local Government Reorganisation Decisions and Cancels Planned Shadow Authority Polls
UK Parliament Opens Inquiry Into Gaps in Climate Change Preparedness
Andy Burnham and Xi Jinping Hold Talks on Trade, Security and British Consular Cases
UK Joins France, Canada and Other Nations in Measures Against Israeli West Bank Settlements
UK Announces New Sanctions Targeting Iranian Nuclear and Military Networks
British Chambers of Commerce Calls for Business Rate Reform and Productivity Support
UK Farmers Warn Dry Summer Could Reduce Crop Yields and Push Up Food Prices
UK Rail Networks Hit by Widespread Delays After Major Signalling Failures
Matt Clifford Resigns as ARIA Chair After Conflict-of-Interest Scrutiny
UK and France Say Joint Border Operations Have Prevented More Than 48,000 Irregular Channel Crossings
UK Core Inflation Remains Above Expectations as Utility and Commodity Costs Stay Elevated
Jaguar Land Rover Considers Up to 4,000 UK Job Cuts Amid Automotive Industry Pressure
UK Government Pauses Local Authority Reorganisation for Legal Review
UK Public Borrowing Reaches £1.8 Billion in July, Adding Pressure Before Autumn Budget
Chancellor John Healey Puts Regional Devolution and Fiscal Discipline at Heart of UK Growth Plan
Counter-Terrorism Police Lead Salford Investigation After Two Teenagers Charged
UK Rejects Financial Reparations for Transatlantic Slavery
UK and Egypt Step Up Diplomacy Over Escalating West Bank Tensions
UK Pauses Council Reorganisation Across Four English Counties
Jaguar Land Rover Plans 4,000 Job Cuts in Major UK Restructuring
UK Unveils Planning and Regulatory Overhaul to Speed Infrastructure and Economic Growth
×