BOE Stuck Between Rock and Hard Place as Inflation Ticks Up Again

The Bank of England's decision to hold interest rates at 3.75% has been met with a mix of expectations and concerns. The Monetary Policy Committee voted six to three in favor of keeping rates steady, but this decision belies the difficulties faced by the central bank.

Three members of the committee wanted to raise rates to 4%, citing an inflation rate ticking back up to 3.1% in August. Energy shocks and global supply chain disruptions are causing problems for the Bank's grand strategy.

A base rate hold is not a pause button for monthly outgoings, and lenders are already pricing in future increases. Swap rates are climbing, and average five-year fixed mortgage rates sit close to 5.87%. Property markets are reacting with caution, as buyers have choices but affordability remains broken.

The Bank's strategy of using interest rates to crush consumer demand and cool down price growth is being tested by global events. Raising borrowing costs won't solve supply-chain bottlenecks or force oil wells to pump faster.