As the UK’s economic outlook gets cloudier, Bank of England policymakers are suddenly speaking more clearly about the choice before them.
After disappearing for holiday for much of August, Governor Andrew Bailey and his Chief Economist Huw Pill have returned suggesting they’re weighing when to halt the most aggressive tightening cycle in over three decades. Another policy maker, Catherine Mann, meanwhile signaled she’ll vote for more hikes.
Investors are leaning toward another quarter-point increase in the BOE’s key rate from 5.25% at the meeting on Sept. 21, but doubts on markets over further hikes have mounted in recent weeks. Bailey said monetary policy is “much nearer now to the top of the cycle,” warning that previous tightening still has to come through the policy pipeline.
That speech was remarkable for the BOE’s often tight-lipped internal rate-setters — the governor, chief economist and three deputy governors — who usually avoid comment on the forward profile for rates. The evolution in communications started at the August meeting, when the BOE added to guidance that has largely been untouched and repeated throughout the year. In addition to the usual pledge to tighten policy if evidence of inflation persistence continued, it included words vowing to leave rates in restrictive territory for a prolonged period. It was the first time in the cycle that rates were deemed to be in “restrictive” territory.
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