Bank of England raises Bank Rate to 4% by an 8-1 vote, one member wanted 4.25%
Serguey Asael Shinder1 min readThe Bank of England's Monetary Policy Committee voted by 8 to 1 at its meeting ending on 4 November to raise Bank Rate by 0.25 percentage points to 4%, according to the summary and minutes published on 5 November. The one dissenting member preferred a larger increase of 0.5 points, to 4.25%. The next decision is due on 17 December.
The Committee ties the move to energy. It notes that the conflict in the Middle East is in its ninth month and that global energy prices have kept rising from an already high level. UK CPI inflation increased to 3.5% in September and is now expected to rise to around 5% by the middle of next year, before falling as the energy effect drops out of annual rates. The minutes say that direct energy effects contributed around 1 percentage point of the September figure, mostly through fuels, and that over the 15 working days to 27 October front-month Brent averaged 108 dollars a barrel and UK gas 216 pence a therm, 38% and 81% above levels at the time of the July Monetary Policy Report.
The MPC writes that there is still limited evidence of knock-on effects on other prices and wages, but that the inflationary pressure in the pipeline now justifies a higher rate, and that recent activity data have generally been stronger than expected. It adds that policy is not on a pre-set path and that it will watch underlying pay, pricing behaviour and slack to judge whether high energy prices spread more broadly.
What it means
A hike while second-round effects are still mostly absent is a pre-emptive move. The single vote for 50 basis points shows where the pressure inside the Committee sits if pay or prices start to follow energy.