Is the UK set for its 15th consecutive interest rate hike later this month? Markets expect that rates will peak closer to 6 per cent – up from 5.25 per cent now – but this might not happen immediately – or at all. Speaking at today’s Treasury Select Committee, the Bank’s governor Andrew Bailey suggested rate hikes were no longer a matter of certainty, as the headline rate of inflation is now back on track with the Bank’s projections for a significant fall by the end of the year.
Speaking to MPs this afternoon, Bailey said that the UK had moved on ‘from a period … where it was clear rates needed to rise going forward,’ insisting ‘we’re not in that place any more’. He is in no position to say what will happen later this month when the Monetary Policy Committee meets: whether rates rise or not will be determined by their vote. But Bailey did put more emphasis on the idea that the MPC could vote to hold the rate at 5.25 per cent – a decision that will be unveiled on 21st September.
Before we get too excited about the prospect of the MPC pausing a rate rise, we should remember that we’ve been here several times before. At the start of the year, the MPC’s minutes said repeatedly that ‘persistent pressures’ would need to be evidenced for them to keep hiking rates. Indeed, that evidence was provided, as the headline rate refused to budge and core inflation was still on the rise. The UK economy has proved very resilient to the rate rises so far – which do take time to be felt across the economy – but have so far done less than the Bank expected to weigh down spending.