What to know

• Huw Pill, Bank of England chief economist, is calling for a prompt rate increase to 4% to combat inflation risks from Middle East energy shocks, arguing delay risks entrenching temporary price pressures.
• Only two of nine MPC members backed a rate rise in July; the majority, including Governor Andrew Bailey, voted to hold rates at 3.75%.
• UK gilt yields have spiked to 18-year highs this week due to Middle East tensions and rising oil prices, constraining government borrowing room by an estimated £14bn.
• Markets showed some recovery on 3 September as oil prices eased and US Federal Reserve signals suggested rate stability, though inflation concerns remain acute.

“Raising bank rate on this basis need not be the start of a prolonged and aggressive series of increases. Indeed, implemented and communicated effectively, a prompt increase in bank rate may serve to head off some of the potential insidious 'catch-up' nominal dynamics that threaten to make temporary departures of inflation from target more persistent.”

Huw Pill, Chief Economist, Bank of England · The Independent ↗

Huw Pill Chief Economist, Bank of EnglandAndrew Bailey Governor, Bank of EnglandAndy Burnham Prime Minister