Division at the Bank of England threatens to cause the first ever four-way split on its interest rate-setting committee this week, as policymakers grow increasingly divided on how to address Britain’s economic challenges.
Markets are betting on the Bank’s Monetary Policy Committee (MPC) voting for a 0.5 percentage point increase to interest rates on Thursday, slowing from the 0.75 percentage point increase at the MPC’s last meeting.
However, the pivot to a slower pace of tightening is expected to stoke division.
City economists predicted it could result in the first four-way split since the Bank gained independence in 1997 as they balance the threat of inflation against the UK’s plunge into recession.
Analysts think one member of the seven person MPC could vote to hold interest rates at their current level of 3pc, one is likely to vote for a smaller rate rise of 0.25 percent points, while up to three members of the committee could back a more aggressive 0.75 percentage point increase.
The division comes against a backdrop of industrial unrest, high inflation, an ultra-tight jobs market and recession. The unusual combination means policymaking is more difficult.
JPMorgan economist Allan Monks warned that a four-way split would “muddle the Bank of England’s message on rates”.
“If the economy is in a recession, it is far from clear that it is set to produce enough weakness to bring inflation sustainably back down to the target,” he said.
Forecasters said the strikes gripping Britain threaten to deepen the downturn this winter and stoke inflation, causing more headaches for the Bank’s rate-setters. Rail staff, postal workers and nurses are all staging walkouts this week.