IoD press release  Bank edges closer to raising interest rates

“The MPC were expected to vote for a hold today, but now another member – Catherine L Mann – has joined Megan Greene and Huw Pill in proposing a rate increase. Ms Mann makes it clear that the collapse of the ceasefire between Iran and the US is the deciding factor in her change of vote.

“The Bank judges that underlying economic momentum is weak, and that this is helping suppress inflationary pressures. But that benefit is double-edged, both weakening inflationary pressures and leaving the economy more vulnerable to a tightening in monetary policy. Members of the MPC are clear that acting too slowly is more costly than acting too quickly, seemingly edging us closer to higher rates later in the year.

“The new government should likewise take note of the UK’s economic vulnerability and act with care over the summer. We have had two years now of speculation regarding how public sector funding gaps will be plugged, which in past years have dragged on confidence and growth. It is crucial to bring that speculation to an end. Meanwhile, the need to better protect the UK from the impact of energy shocks grows ever more acute. This will require a more pragmatic approach to net zero transition, which recognises the ongoing need for fossil fuels alongside the right incentives to speed electrification and manage transition costs.”