The Bank of England has raised Bank Rate by a quarter of a percentage point to 4 per cent, its Monetary Policy Committee voting by a majority of eight to one at a meeting that ended on the fourth of November. The decision and the accompanying minutes were published the following day.
The single dissent was hawkish rather than dovish. One member, Catherine L Mann, voted to raise Bank Rate by half a percentage point to 4.25 per cent, so the Committee's disagreement was over the size of the increase and not over whether to move at all. That detail matters for anyone reading the vote as a signal, because a one vote minority arguing for more tightening points in the opposite direction from a minority arguing for a pause.
The Committee acted against an inflation outturn that had moved the wrong way, with consumer price inflation rising to 3.5 per cent in September. Bank staff projections published alongside the decision put headline inflation higher still through the first half of next year. The stock of United Kingdom government bonds held for monetary policy purposes stood at 362 billion pounds at the date of the meeting.
The analytical question for British businesses is less about this quarter point than about the path the Committee has now signalled. A tightening cycle that resumes after a pause changes the planning assumption for anyone refinancing debt in the coming year, because it removes the expectation that the next move is downward. Corporate borrowers who had deferred refinancing in anticipation of cheaper money are the group most exposed to that shift, and treasury teams that locked in fixed rates earlier in the year look better positioned than they did.
The second consideration is the divergence it creates. A Bank Rate at 4 per cent alongside an inflation projection above target for several more quarters implies the Committee is prepared to accept weaker demand to bring prices down. For employers that reads as a slower labour market and softer wage settlements in the next bargaining round, which is the mechanism the Committee is relying on. Recent output has been described as stronger than expected, which gives the Committee some room to act without immediately forcing a contraction, but that room narrows with each increase.
Andrew Bailey, who chairs the Committee as Governor, voted with the majority for the quarter point move.
