- Mann joins Pill and Greene in calling for a hike
- Energy shock lifts concerns over inflation persistence
- Bailey insists MPC not leaning towards tightening
- Forecasts point to resilient growth, easing core inflation

By Harry Daniels
LiveSquawk News
@HarryDaniels71

15:00 GMT | 30 July 2026

LONDON – The Bank of England left interest rates unchanged on Thursday, as widely expected, but policymakers struck a more hawkish tone, fuelling speculation that the next move could yet be higher.

The Monetary Policy Committee voted 6-3 to leave the Bank Rate at 3.75%, in line with expectations.

However, there was a notable shift in the voting pattern, with Catherine Mann joining Megan Greene and Huw Pill in backing a 25 basis-point increase to 4.00%.

In its accompanying statement, the BoE noted that crude oil and refined energy prices had remained elevated and volatile following recent events in the Gulf, adding that the economic impact of the latest energy shock remained uncertain.

Policymakers warned that "the risk of material second-round effects in price and wage-setting, against which policy needs to lean, was greater the longer higher energy prices persist."

Source: BoE July Monetary Policy Report

The vote underscored a growing divide within the Committee, with an expanding minority prepared to act pre-emptively against what they see as mounting inflationary risks stemming from higher energy prices.

For the two established hawks, Pill and Greene, there was sufficient evidence to justify a "risk management strategy". Mann, a recent convert to the tightening camp, said: "The key change in the environment for my decision is the collapse of the US-Iran Memorandum of Understanding, the widening of the Middle East conflict, and the associated volatility in energy prices."

Despite the increasingly hawkish rhetoric, Paul Dales, chief UK economist at Capital Economics, said he remained unconvinced that the BoE was preparing to raise rates.

"The other six MPC members didn't appear any closer to voting for rate hikes. In fact, Andrew Bailey, Sarah Breeden and perhaps Dave Ramsden appeared less worried by the outlook for inflation."

In the members' individual assessments, Governor Andrew Bailey said there was little evidence so far of meaningful second-round inflationary effects, although he cautioned that it was still too early to draw firm conclusions.

(a) The central projection and scenario shown here are conditioned on the same market curve for Bank Rate. Further details on conditioning assumptions can be found in Table 3.A and the Projections Databank accompanying this Report. The final projections are for 2029 Q3.

The BoE retained its three-scenario framework (A, B and C) to reflect the uncertainty surrounding the US-Iran conflict and the resulting energy shock.

Its central projection sees inflation peaking at 2.9% in the third quarter before easing to 2.6% a year later and falling below the 2% target by the third quarter of the forecast horizon.

"As that's based on market pricing for Bank Rate to rise to around 4.25%, it implies the bank thinks interest rates need to be lower than that, or not rise from 3.75% at all," Dales said.

GDP growth is forecast to average around 1.1% over the next two years before rising above 1.5% later in the forecast period. Spare capacity is expected to widen modestly, with the output gap reaching -1.3% in the fourth quarter of 2026 before gradually narrowing thereafter.

On the labour market, it said it continued to operate with a degree of spare capacity.

Speaking at the post-meeting press conference, Bailey was careful to keep all policy options open.

He acknowledged that the UK economy had proved more resilient than many had expected but argued that the underlying trend remained one of subdued growth.

The Governor said the MPC was closely monitoring whether higher energy prices feed through into wages and broader price-setting behaviour, adding that the balance of risks to inflation had shifted to the upside.

"I don't think it would be wise to wait for all of the second-round effects to emerge," Bailey said.

However, he was equally keen to temper expectations of an imminent policy tightening, adding: "...please do not leave this room thinking that the Bank of England is edging towards a hike."