LONDON, July 30 - The Bank of England held its Bank Rate at 3.75% after a divided vote by the Monetary Policy Committee (MPC). The committee split 6-3, with six members preferring to maintain the current level and three voting to raise the rate to 4%.
The range of views set out by individual MPC members reflects concern about external energy shocks and uncertainty over whether those shocks will transmit into broader inflation through second-round effects. Below are key excerpts from the remarks issued by members following the decision.
Voted to maintain Bank Rate at 3.75%
Governor Andrew Bailey
"The possibility of repeated resumptions of conflict combined with lower than usual European gas stock levels and a fall in global refining output mean that risks to energy prices lies to the upside."
"There is little evidence yet of second-round effects... although it is too early to take much comfort from that."
"Holding Bank Rate is appropriate as global conditions look to be more uncertain and inflationary, while domestic conditions are on balance more benign as regards the prospects for inflation."
Deputy Governor Sarah Breeden
"While my confidence around the domestic inflationary environment has increased, risks to global prices have shifted to the upside."
"Looking ahead, I will continue to focus on how second-round effects are likely to evolve."
External MPC member Swati Dhingra
"I continue to see value in waiting for a clearer read on the energy shock in the coming months before deciding whether a change in policy is required"
Deputy Governor Clare Lombardelli
"Policy would need to be adjusted were there to be evidence of risks of significant second-round effects, including from persistently higher energy prices."
Deputy Governor Dave Ramsden
"If they (upside risks to inflation) were to crystallise, a hike in Bank Rate may be warranted. If the risks were to subside and the underlying disinflation process continued, I would consider resuming the cutting cycle."
External MPC member Alan Taylor
"Keeping Bank Rate on hold, at a higher level now than the pre-conflict implied path, gives insurance for now, before resuming cuts when and if geopolitical uncertainty clears."
Voted to raise Bank Rate to 4%
External MPC member Megan Greene
"A proactive hike in Bank Rate may reduce the probability that second-round effects kick in."
External MPC member Catherine Mann
"The key change in the environment for my decision is the collapse of the U.S-Iran Memorandum of Understanding, the widening of the Middle East conflict and the associated volatility in energy prices."
Chief Economist Huw Pill
"It is appropriate to raise Bank Rate now, thereby cutting through noise in commodity and asset price developments to offer a clear and unambiguous signal of our willingness and ability to address upside risks to inflation"
The split vote highlights diverging views inside the MPC about how to balance the current domestic inflation picture against elevated and uncertain global risks. Several members pointed specifically to upward pressure on energy costs driven by conflict, lower-than-normal European gas inventories and reduced refining output as factors shaping their assessments. At the same time, members who supported holding the rate noted a lack of clear evidence that energy shocks have generated broad-based second-round inflationary effects.
Members who favoured a rate increase argued that acting now would send a clearer signal to markets and could lower the chance of broader inflationary transmission. Those who voted to maintain Bank Rate stressed the need to observe how the energy shock unfolds in the near term before changing policy.
This divergence in the committee's view leaves the BoE positioned to adjust policy in either direction depending on how energy markets, commodity and asset price volatility, and evidence of second-round inflation effects evolve.