'Scrooge' Bank of England boss could block Christmas interest rate cut
by PATRICK TOOHER, CONSULTANT CITY EDITOR · Mail OnlineAndrew Bailey could still play Scrooge, scuppering a pre-Christmas interest rate cut even as the economy limps towards recession.
The Bank of England boss is the 'swing voter' in a divided panel of rate-setters who meet this week.
Traders expect the cost of borrowing to be cut by a quarter of a percentage point to 3.75 per cent, providing a much-needed tonic for growth, which has proved elusive since the summer as households and businesses reined back spending ahead of the Budget.
However, if inflation stays at almost twice the Bank of England's 2 per cent target, another split among its nine-member Monetary Policy Committee is on the cards, with Governor Bailey again having the casting vote.
Bailey, who voted to keep rates on hold last time, was noticeably absent from a scheduled meeting with MPs on the Treasury Select Committee to discuss the Budget last week when divisions among the rate-setters were laid bare.
'Given Bailey has become the Monetary Policy Committee's swing voter, it was particularly bad timing that he was absent from this session,' said Andrew Goodwin, chief UK economist of the think tank Oxford Economics.
Bailey was at a meeting of policymakers in Beijing in his unpaid role of chairing the international Financial Stability Board.
Along with other rate-setters he will pay close attention to the latest inflation figures, which will be published the day before Thursday's interest rate decision. If the Consumer Prices Index remains stuck around its current level of 3.6 per cent, Bailey could be swayed to delay another rate cut, which would be the sixth decrease since Labour came to power last year.
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However, Goodwin said: 'Bailey will probably prefer to support a December cut rather than go against market pricing and potentially weaken the credibility of future communications around the outlook for interest rates.'
The Monetary Policy Committee will also take note of the latest jobs figures, due out on Tuesday. Unemployment has already hit 5 per cent after Chancellor Rachel Reeves clobbered business with a £25 billion hike in employer National Insurance Contributions in her first Budget in October last year. A big rise in the minimum wage is also in the pipeline.
Monetary Policy Committee 'hawk' Catherine Mann, who has only voted to cut rates once in 34 meetings, calls these extra costs 'the pig in the python'.
'It is still being digested by firms,' she told MPs.
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