Bank of England holds interest rates at 3.75% in first decision under Prime Minister Andy Burnham

The Bank of England kept its benchmark interest rate unchanged at 3.75% on July 30, marking the first monetary policy decision since Andy Burnham became Prime Minister ten days earlier. Inflation is running at 2.6%, meaningfully above the BoE’s 2% target, yet the Monetary Policy Committee decided the smart move was to sit tight. Why the BoE chose to do nothing The MPC voted 7-2 to hold rates, with only two members pushing for a hike to 4%. The main culprit behind above-target inflation has been disruptions to energy supplies from the Middle East, linked to the ongoing Iran conflict. Rising energy costs have filtered through the entire economy, pushing up prices for everything from groceries to manufacturing inputs. But oil prices have actually been declining recently, and there has been growing optimism around potential ceasefires in the region. Those two factors have taken a lot of air out of the rate-hike narrative. Markets were pricing in a meaningful chance of the BoE tightening further; that probability has dropped considerably. The Burnham factor Andy Burnham took office on July 20 after being elected Labour leader unopposed on July 17. The BoE operates independently of the g...