Shadow MPC Advises Bank of England to Hold Interest Rates Amid Easing Inflation Concerns

The Shadow Monetary Policy Committee, a group of economists compiled by City AM, is advising the Bank of England to hold interest rates at 3.75 per cent on Thursday.

This decision comes after recent economic data releases showed that the threat of spiraling inflation has eased. The Office for National Statistics reported that inflation dropped to 2.6 per cent in the year to June, although price growth is expected to edge up again as energy prices are reset.

The Shadow MPC members also pointed out that job vacancies have fallen, easing concerns about a wage-price spiral, and GDP expanded by just 0.1 per cent in May 2026, potentially reflecting tamed demand effects.

However, some members of the committee urged the Bank to wait for further data before making any decisions on interest rates. Julian Jessop said that 'broad money growth remains too weak to fuel a sustained rise in inflation', while Katharine Neiss pointed out that lower headline inflation and slow private sector pay growth allowed the Bank to remain in 'wait and see mode'.

Only one member, Professor Jagjit Chadha, favored an interest rate hike due to the country's struggles in getting inflation to stick to two per cent over recent years. He said that 'alongside a firmer stance against inflation, communication must be more consistent about the need to act with vigilance against inflationary impulses and not to look for excuses to cut rates'.

The Bank of England's interest rates decision on Thursday is set to be fraught with difficulties as economists at the central bank will have to make forecast judgment calls on growth, inflation, and unemployment.