European Daily BoE Recap—Opening the Door to a November Hike

Economics Research 17 September 2026 | 6:06PM BST

European Daily: BoE Recap—Opening the Door to a November Hike

n The MPC voted 6-3 to hold Bank Rate at the September meeting, as expected. James Moberly | The Committee noted that risks of material second-round effects had increased Goldman Sachs International since the July meeting and would likely rise further if energy prices remain Sven Jari Stehn elevated. The policy guidance was unchanged, reiterating that the Committee | Goldman Sachs International stands ready to act as necessary to return inflation to target. But Bailey, Breeden, Lombardelli, and Ramsden all signalled openness to raising Bank Rate if inflationary risks continue to build. n Our interpretation of the communications is that the MPC will probably hike in November if energy price pressures persist. We therefore maintain our forecast for a 25bp hike at that meeting, although a hold remains possible with lower energy prices or weaker data. Today’s communications did not offer a strong signal on the path beyond November, and we maintain our baseline that the MPC will refrain from tightening further as the labour market remains soft, underlying inflation rises only modestly, and wholesale energy prices start to ease in early 2027. n The annual QT decision saw the MPC agree a multi-year plan to reduce the stock of gilts held for monetary policy purposes to zero by 2034 (excluding £120bn of longer-dated bonds) through £20bn per year of sales. But the Bank indicated that it will pause APF auctions while it considers a new model in which gilts would be sold to the DMO.

BoE Recap—Opening the Door to a November Hike

The MPC voted 6-3 to hold Bank Rate at the September meeting – in line with expectations – with Pill, Greene, and Mann dissenting in favour of a 25bp hike.

The minutes noted significant increases in energy prices since the July meeting, and indicated that Bank staff now expect headline inflation to rise to slightly above 4% in 2027Q1. The Committee reiterated that there is little evidence so far of material second-round effects from the energy shock, but did suggest that the risk of such effects emerging had increased since the July meeting and would likely rise further if energy prices remained elevated.

The MPC reiterated that it expects a soft labour market and tight financial conditions to reduce inflation over time. But it also acknowledged that activity had been slightly firmer than anticipated, with Bank staff now estimating that GDP will rise by 0.4% in Q3. The Committee noted some improvement in employment indicators and judged

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that there had likely been some stabilisation in slack.

The guidance language was unchanged – as expected – reiterating that the Committee stands ready to act as necessary to return inflation to target. But in the individual paragraphs, Bailey, Breeden, Lombardelli, and Ramsden all signalled openness to tightening policy if inflationary risks continue to build. Bailey indicated that it is “likely that policy may have to tighten” should the Middle East conflict continue for an extended period “as appears to be the case”, and risks of second-round effects increase. Breeden stated that “it becomes increasingly appropriate for Bank Rate to respond” if risks to the outlook for second-round effects crystallise, while Lombardelli signalled that “the case for raising Bank Rate is building the longer the conflict continues without lasting resolution”. Ramsden argued that “there could be a case for increasing Bank Rate” if upside inflation pressures continue to build.

The minutes and paragraphs were not specific on the hurdle for raising Bank Rate. The communications also did not give a clear signal on the timing of any possible policy tightening, though the minutes did note that it would not be appropriate to wait too long for evidence of second-round effects.

The annual QT decision saw the MPC agree a multi-year plan to fully unwind the stock of gilts held for monetary policy purchases by 2034.…