Has the Bank of England done enough to stave off recession?

The Bank of England has held interest rates at their 15-year high for a second time. Markets were expecting another pause, but there was no guarantee: once again the Monetary Policy Committee (MPC) was split on the decision, voting 6 – 3 to hold rates at 5.25 per cent. The minority on the committee were in favour of increasing rates by 0.25 percentage points. 

The Bank’s governor warned these votes would be ‘tight’ and hard to predict for the foreseeable future. But some are taking this second pause as a sign that rates have peaked. Capital Economics says it is ‘all-but confirmed’ now, while also noting that the ‘Bank is keeping the door open to the possibility of further rate hikes’. There is growing market consensus that rates have reached, or nearly reached their peak, as indicated in The Spectator’s data hub graph below.

The Bank knows it is walking a fine line at the moment between tackling inflation but also keeping the UK on the right side of a recession.