Bailey Keeps Rate Hike Door Open Amid Global Uncertainty

Bank of England Governor Andrew Bailey left the door open for an interest rate hike yesterday, warning that global conditions are becoming increasingly inflationary. Despite this, he emphasized that holding borrowing costs at 3.75% was 'appropriate' given domestic circumstances.

The Bank's Monetary Policy Committee (MPC) voted 6-3 to keep rates unchanged, with a widening split after rate-setter Catherine Mann changed her mind and voted for an immediate quarter-point hike to 4%. Mann cited the collapse of the US-Iran ceasefire and associated volatility in energy prices as reasons for her change of heart.

Traders still expect at least one rate rise this year, although the chances were trimmed to less than 30% after the MPC's decision. Government borrowing costs fell, with yields on ten-year UK bonds dipping 5%, reversing a spike seen a day earlier.