The Bank of England's Monetary Policy Committee voted to hold Bank Rate at 3.75% at its July meeting, resisting pressure from three of its nine members to raise borrowing costs by a quarter of a percentage point despite lingering concerns about the persistence of inflation.
The decision was taken on a 6-3 split, according to the minutes and monetary policy summary published on the bank's website. Members Megan Greene, Catherine Mann and Huw Pill voted for an immediate 25 basis point hike to 4.00%, arguing that risks to the inflation outlook remained tilted to the upside and that further tightening was warranted.
THREE MEMBERS DISSENT FOR A HIKE
The majority preferred to keep policy unchanged, citing further evidence that consumer price inflation was on a path back to the 2% target. CPI inflation had fallen to 2.6% since the previous meeting, the committee noted, offering some reassurance that domestic price pressures were continuing to ease alongside the broader normalisation of global supply chains and energy costs.
Nevertheless, the MPC judged that the risks to the inflation outlook were tilted to the upside, an assessment that appeared to reflect concerns over the persistence of services inflation, wage growth and the possibility that a further easing in financial conditions could stimulate demand more quickly than expected. Officials have highlighted domestic labour-market tightness as a particular area of concern.
The three dissenting members took the view that with those upside risks live, the case for further tightening remained. Their vote for a 25 basis point increase would have taken Bank Rate to 4.00% and represents one of the largest hawkish minorities on the committee in recent meetings, underlining the divisions within the MPC over how quickly to move policy.
QUANTITATIVE TIGHTENING PROCEEDS
The committee also reaffirmed the pace of its balance-sheet reduction programme. UK government bonds held for monetary policy purposes stood at £491 billion, the bank said, as gilt sales and maturities continued to run down the portfolio built up during the pandemic-era quantitative easing programme.
The MPC has repeatedly emphasised that decisions on Bank Rate and the pace of quantitative tightening are separate, with the bond programme running in the background at a pre-announced pace and Bank Rate remaining the active tool of monetary policy. That framing has been maintained through both tightening and holding phases of the current cycle.
The Bank of England has been navigating an unusually noisy inflation backdrop over the past year, with headline CPI drifting close to the target while services inflation and pay growth have proved more stubborn. Financial markets had been divided ahead of the meeting on whether the committee would tilt hawkish or hold firm, and gilt yields had drifted higher in the days before the announcement.
The next scheduled Bank Rate decision will be taken at the committee's following meeting, with the MPC saying it would continue to monitor incoming data on activity, the labour market and inflation persistence closely as it decides on the appropriate stance of policy. The full minutes and the monetary policy summary were published on the bank's website.