IoD press release  Bank keep close eye on inflation outlook with cautious hold in rates

“The MPC were expected to vote for a hold today, but a further member – Megan Greene – joined with Huw Pill to propose a rate rise.

“Higher levels of concern amongst the MPC over the inflation outlook may seem counterintuitive, as inflation came in below Bank of England expectations in May and oil prices have fallen to their lowest levels since March amidst peace deal hopes. But their positioning highlights the reality that even the reopening of the Strait of Hormuz and a future resumption of production will not prevent the unprecedented shock to global oil supplies from taking its toll.

“The Iran conflict will have a lasting effect on inflation and financing costs for both businesses and households. Growth is expected to be lower in the short-term and the labour market remains weak. The Bank is right to keep a firm eye on inflation pressures to avoid the risk of acting too late again, but must balance that carefully against a slowing economy. With monetary policy constrained, the need for government policy to improve the environment for growth is greater. A key priority must be to address the UK’s vulnerability to future energy shocks through a pragmatic approach to net zero transition that better controls near-term costs for businesses and households.”