This could have been worse. Even though one member of the Bank’s Monetary Policy Committee voted for an immediate rate rise, the minutes suggest that most of the nine members remain reluctant to hike rates – for now.
Yes the Bank held rates today, but the committee’s minutes suggest they did so through gritted teeth.
With warnings that the energy shock is just getting started, and that wider inflationary contagion is inevitable, the Bank’s ratesetting grandees are sounding less hopeful that the inflationary wave will quickly wash over the UK economy.
While the Bank has temporarily turned its back on the threat of inflation, it made it clear that it is prepared to act, perhaps as soon as the next meeting in June, if inflation and the events in the Gulf driving them remain unresolved.
From a market that as recently as January was looking at two potential rate cuts this year, we now face the possibility of several rate rises by the end of 2026 if oil prices continue to rise towards $150 a barrel and the Iran crisis remains unresolved.
With 2-year swap rates already more than 1.0% higher than they were on the eve of the war, mortgage borrowers face a torrid time the longer this crisis continues. With the conflict in the Gulf frozen rather than resolved, there is still plenty of scope for things to get worse.
Leave a Comment