The Bank of England's September decision left Bank Rate at 3.75%, but three policymakers wanted to move higher. The 6–3 vote for a hold leaves an unresolved argument over how to respond to energy-driven inflation pressure.
The decision, published on September 17, came with two competing concerns: a risk that higher energy costs could spread into other prices, and a soft labour market that could restrain demand. The next decision is due on November 5.
The evidence runs in both directions
The Bank reported services inflation at 3.4% in August, unchanged from July. Annual private-sector regular wage growth was 2.9% in the three months to July, down from 3.3% at the start of the year.
Our analysis: those readings help explain why a fresh energy shock does not produce an automatic policy answer. Evidence of earlier disinflation can coexist with a new source of upward pressure. The committee has to judge whether the new shock changes the underlying path.
Waiting gives policymakers more information about that path. It also carries a risk if businesses and workers start adjusting prices and pay to persistently higher inflation. The split vote shows different judgements about that trade-off at the September meeting.
Why this is a complicated sterling story
Higher expected interest rates can support the relative-rate case for a currency. But if those rates are responding to a cost shock while demand is under pressure, the growth implications can complicate the picture.
The same shock can raise household bills, squeeze real spending and create a case for tighter policy. A currency outlook that includes only the interest-rate channel leaves out part of the economic problem.
GBP/USD adds the US outlook to that judgement. EUR/GBP compares Britain with the euro area. Neither pair can be reduced to the Bank of England's rate setting alone.
What would make November different?
A change in the vote would be informative, but the explanation matters as much as the count. More support for tightening would need to be read alongside the evidence that persuaded members. Fewer votes for a rise could reflect a different view of persistence rather than a sudden dismissal of inflation risk.
Watch the assessment of price and wage-setting, the labour market and the effect of borrowing costs on demand. Those are the channels connecting the energy shock with the policy decision.
The September hold should therefore be read as a decision to wait at that meeting. The three votes for an increase show why it is too early to treat it as a settled direction for the next one.
Reporting sources
Forex and CFD trading carries a risk of substantial loss. Examples are hypothetical; analysis is not a personal trading recommendation. Editorial standards · Report a correction.