Bank of England Says Scream If You Want Rates to Go Higher
Policymakers are gambling that the economy is strong enough to withstand higher borrowing costs.
Scream if you want to go faster.
Photographer: Hy Peskin/Archive Photos via Getty Images
The Bank of England decided to deliver its inflation medicine in a bigger dose at Thursday’s monetary policy committee meeting. A majority of 7-to-2 voted for a move of 50 basis points to take the official rate to 5%, double the size of the increase anticipated by economists. And the accompanying message in its statement was clear: There’s more tightening to come if inflation persists. Policymakers are betting that the economy is sufficiently resilient to bear the highest borrowing costs in 15 years. That’s quite a gamble.
The MPC did not push back on the recent upward move in futures pricing, with money-market expectations for the likely peak in borrowing costs now above 6%. Two-year yields are at 5.1%, their highest since July 2008.