LONDON, July 30 (Reuters) – The Bank of England left interest rates on hold at 3.75% on Thursday after a split 6-3 vote by its Monetary Policy Committee.
Below are key excerpts from comments by individual members of the MPC about their latest decision, as well as comments made by governor Andrew Bailey and two deputy governors during a press conference.
BAILEY ON DIRECTION OF FUTURE RATES
“Please do not leave this room thinking that the Bank of England is edging towards a hike, because frankly, there’s nothing in what I said, and I think any of us have said, along those lines. We took a decision today to leave bank rate unchanged, and that is the relevant conclusion.”
BAILEY ON INFLATION
“It is our job to ensure that inflation gets back to the 2% target and stays there.”
BAILEY ON THE MIDDLE EAST CONFLICT
“If the conflict in the Middle East persists for an extended period, for example, and we begin to see signs of emerging second-round effects, it’s likely that we will have to tighten policy to counter inflationary pressures in the UK economy.”
BAILEY ON THE LABOUR MARKET
“Spare capacity in the labor market is likely to reduce workers’ ability to secure higher nominal wage growth in response to higher inflation.”
DEPUTY GOVERNOR CLARE LOMBARDELLI ON HER VOTE
“It wasn’t a close judgment for me. I think it’s pretty clear, and I was pretty clear that holding rates, at their current level, is the right thing to do.
“We have had more evidence on disinflation. I’ve learnt quite a lot about the security of that disinflation versus prior to the war.”
DEPUTY GOVERNOR DAVE RAMSDEN ON QT
“Our latest estimates are the impact of QT, which remember is over that period, is about 20 to 30 basis points. That’s up from what we published last year with 15 to 25 basis points, but these are very small incremental increases against that backdrop and you know, suggests that QT is driving a very small fraction, between a 10th and a sixth, of that total change in term premia.
“Bank rate is our primary tool, and QT is operating in the background.”
VOTED TO MAINTAIN BANK RATE AT 3.75%
GOVERNOR BAILEY
“The possibility of repeated resumptions of conflict combined with lower than usual European gas stock levels and a fall in global refining output mean that risks to energy prices lies to the upside.”
“There is little evidence yet of second-round effects… although it is too early to take much comfort from that.”
“Holding Bank Rate is appropriate as global conditions look to be more uncertain and inflationary, while domestic conditions are on balance more benign as regards the prospects for inflation.”
DEPUTY GOVERNOR SARAH BREEDEN
“While my confidence around the domestic inflationary environment has increased, risks to global prices have shifted to the upside.”
“Looking ahead, I will continue to focus on how second-round effects are likely to evolve.”
EXTERNAL MPC MEMBER SWATI DHINGRA
“I continue to see value in waiting for a clearer read on the energy shock in the coming months before deciding whether a change in policy is required”
DEPUTY GOVERNOR LOMBARDELLI
“Policy would need to be adjusted were there to be evidence of risks of significant second-round effects, including from persistently higher energy prices.”
DEPUTY GOVERNOR RAMSDEN
“If they (upside risks to inflation) were to crystallise, a hike in Bank Rate may be warranted. If the risks were to subside and the underlying disinflation process continued, I would consider resuming the cutting cycle.”
EXTERNAL MPC MEMBER ALAN TAYLOR
“Keeping Bank Rate on hold, at a higher level now than the pre-conflict implied path, gives insurance for now, before resuming cuts when and if geopolitical uncertainty clears.”
VOTED TO RAISE BANK RATE TO 4%
EXTERNAL MPC MEMBER MEGAN GREENE
“A proactive hike in Bank Rate may reduce the probability that second-round effects kick in.”
EXTERNAL MPC MEMBER CATHERINE MANN
“The key change in the environment for my decision is the collapse of the U.S-Iran Memorandum of Understanding, the widening of the Middle East conflict and the associated volatility in energy prices.”
CHIEF ECONOMIST HUW PILL
“It is appropriate to raise Bank Rate now, thereby cutting through noise in commodity and asset price developments to offer a clear and unambiguous signal of our willingness and ability to address upside risks to inflation”
(Compiled by Yoruk Bahceli and Sarah Young, editing by David Milliken)
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