The Bank of England has been advised by City AM’s Shadow Monetary Policy Committee to maintain interest rates at 3.75 per cent. This recommendation comes despite expectations that inflation will peak higher than previously forecast, attributed to the continuation of the Iran war.
The Shadow MPC, a group of top economists, was split 6-3 on the decision, with the majority favouring no change to interest rates. However, some members warned that the argument for delaying a hike is becoming “thin”.
Three economists on the nine-member committee – Professor Jagjit Chadha, Julian Jessop, and Anna Leach – suggested the Bank should raise interest rates by 25 basis points. They cited concerns such as inflation remaining above the two per cent target for two years and elevated price expectations.
Barclays chief UK economist Jack Meaning, who voted to hold rates, noted that inflation is expected to peak higher in the coming months as oil prices have risen. Brent crude oil stood at $106 per barrel on Tuesday morning, up from $72 in early July. Meaning suggested the Bank should still convey a “hawkish message” indicating potential future hikes.