The Bank of England's Monetary Policy Committee voted 7-2 to hold Bank Rate at 3.75% at its June meeting, with external member Megan Greene and Chief Economist Huw Pill dissenting in favour of a 25 basis point increase to 4.00%. The decision was announced on 18 June.
CPI inflation had fallen to 2.8% since the previous meeting, although the committee said it was expected to rise later this year as the effects of higher energy prices continue to pass through. The committee said the risk of material second-round effects in price and wage-setting was greater the longer higher energy prices persisted.
TWO MEMBERS VOTE FOR A HIKE
Greene and Pill preferred to raise Bank Rate to 4% as part of a risk-management strategy, given significant uncertainty about the extent of second-round effects. Catherine Mann, who voted with the majority, saw upside inflation risks as more prominent but judged that an immediate increase was not required because policy tightening would transmit to the economy rapidly.
For six of the seven members in the majority, recent data provided further evidence that underlying disinflation had been on track before the conflict, and the higher interest rates facing households and businesses were already acting to reduce inflation over time.
The minutes record that Greene and Pill were less confident in the pace of underlying disinflation and more concerned about second-round effects in price and wage-setting, while Governor Andrew Bailey said recent inflation outturns gave greater confidence that gradual underlying disinflation had continued. The committee said it stood ready to act as necessary to ensure that CPI inflation remains on track to meet the 2% target in the medium term.
GILT STOCK AT £522 BILLION
The minutes said that on 17 June the stock of UK government bonds held for monetary policy purposes was £522 billion.
The MPC's next scheduled decision was due on 30 July 2026.
The minutes noted that plans for a Middle East peace deal had been announced in the days before the meeting, with oil and gas prices falling to around $79 per barrel and 100 pence per therm.
The committee said it would continue to monitor closely the situation in the Middle East and how its impact propagates through the economy.