BOE Leaves Rates Unchanged as Bailey Pushes Back Against Rate Hike Speculation

Bank of England Governor Andrew Bailey emphasized that disinflation is proceeding slowly in his press conference after the BOE left interest rates unchanged. The decision was made with a vote of 6-3, and Bailey acknowledged that higher energy prices could eventually create inflationary 'second-round effects', but noted there is little evidence these pressures have become embedded in wages or broader pricing so far.

Bailey described the UK economy as subdued, with the labor market softening, domestic inflation pressures easing, and weak demand limiting companies' ability to pass on higher costs. He stressed that this is not the Bank's base case, but rather a preparedness to adjust policy if the outlook worsens, particularly if Middle East-related energy shocks become more persistent.

The BOE Rate remained unchanged today, with Bailey explicitly pushing back against market speculation of a rate hike, stating investors should not think the BoE is moving toward tighter policy. He also noted that current market pricing reflects risk premia rather than the Bank's central expectations and that the market's base case remains for rates to stay on hold.