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BoE policymakers split on acting early amid renewed energy shock

Governor Andrew Bailey warned energy prices could stay higher for longer, and he pointed to refinery pressure and wider inflation risks beyond any single geopolitical channel.

Reported · Written up by our desk · Central Banks

Bank of England policymakers debated how to respond to a renewed energy shock at a Treasury Committee hearing in parliament, with officials divided over whether to act pre-emptively versus take a more patient stance. Governor Andrew Bailey said energy prices are already higher and could rise further, citing disruption around the Middle East and wider pressures on refining capacity.

Bailey also argued that the dynamics behind inflation are broader than any one geopolitical route, noting that part of the crack spread widening is linked to Ukrainian attacks on concentrated Russian refining capacity. He framed the message that the inflation shock is not confined to one channel, and he added that food price inflation has come in below expectations while risks remain tilted higher.

Megan Greene, who voted for a 25 basis point rate hike in July, said the key concern is not only the level of oil prices but how long they remain elevated and whether persistence could trigger second-round effects through wages and prices. Her case was that policymakers could adjust if the shock turns out smaller, but that allowing inflation to become embedded may be harder to reverse.

Deputy Governor Dave Ramsden made the counterpoint, emphasizing that domestic wage growth has been running below the BoE’s forecasts this year. He supported holding Bank Rate at 3.75% rather than joining Greene’s call for a hike, leaving the dispute focused on how much weight to give the still-benign domestic inflation evidence before acting.

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