Bank of England holds rates at 3.75% in 6-3 vote, Bailey says no gradual move toward hikes
1. Decision: By a 6-3 vote, the Bank of England kept interest rates unchanged at 3.75%, with three policymakers voting for a 25-basis-point hike. 2. Forward guidance: BoE Governor Bailey stressed that people should not think the Bank is gradually moving toward rate cuts, while saying the BoE is “ready to act.” 3. Energy prices: Energy price volatility has been sharp lately, and oil and gas prices are now well above earlier forecasts. The Bank will continue to watch the impact of the Iran-Israel conflict on inflation. 4. Quantitative tightening (QT): The impact of balance sheet reduction on 10-year gilt yields has been relatively mild. A decision on next year’s QT plan will be made in September. 5. Economy and labor market: GDP growth is expected to remain around 1% in both 2026 and 2027. Job vacancies and private-sector wage growth have fallen to their lowest levels since the pandemic.