Summary of the Bank of England’s MPC Meeting

The Bank of England’s Monetary Policy Committee (MPC) reconvened on Tuesday 2nd November to vote on what should happen to the bank’s base rate of interest. The meeting – which is one of eight per year - has been one of the most eagerly anticipated for years, considering the rising rate of inflation off the back of the pandemic.

The rate of inflation in the UK is currently above the 2% target set by the Bank of England, with previous projections suggesting it will tip-toe above 4% for a period next year – with the latest MPC projections suggesting it could even reach 5%.

What is the MPC?

The MPC is a nine-member group of leading economists, banking experts and external members appointed by the Chancellor. They discuss the current state of the economy and how they can change the base rate of interest to manipulate the spending and saving habits of UK residents, which in turn affects the rate of inflation. MPC members finish discussions with a vote on how to proceed.

November 2021 Meeting

There would be one of two major outcomes of the vote, either to raise interest rates to counteract rising inflation rates or to hold the rate at 0.1% and keep inflation hovering around 4% for the time being – which Rishi Sunak alluded might happen back in March.

The conclusion of the meeting and voting favoured the latter, with chief economists and analysts deciding that the Bank of England’s base rate would remain at 0.1% at this time. The committee voted 7-2 in favour of not increasing the base rate. However, within the committee’s future projections, there is evidence to indicate the base rate will return to 1% by the end of next year, and we could see some level of increase as early as December.

The Reaction

Many were expecting the increase to come this month. The opposite outcome has meant some commentators have copied and pasted the former governor’s nickname “unreliable boyfriend” to current governor, Andrew Bailey.  

Yet, the decision to keep the base rate at 0.1% has received little backlash from experts outside of the MPC. One analyst quoted in The Guardian stated that any increase to the base rate could force the UK back into recession in 2022, making the decision a smart one.

One leading economist, Paul Dales, has summarised the proceedings by stating that the MPC might not have taken action today, but they are clearly preparing to increase the base rate to improve the economic outlook soon. But despite the committee remaining reluctant to move now, they are sending a clear message that an increase is coming without trying to worry people that they will push any increase too far.

It’s almost certain that some sort of increase will be implemented by February 2022.

November 2021