The Bank of England has maintained interest rates at 3.75%, with both dovish and hawkish committee members using the meeting minutes to present detailed arguments for their positions. This debate reveals the genuine uncertainty facing policymakers.
The monetary policy committee’s 5-4 split featured clear philosophical divisions. Dovish members like Alan Taylor argued that weaker growth and lower inflation already justify more aggressive easing, with Taylor suggesting a 3% base rate should be “in our sights.” Other dovish members including Swati Dhingra, Dave Ramsden, and Sarah Breeden supported immediate cuts.
Hawkish committee member Megan Greene presented the opposing case, warning about high consumer inflation expectations and strong wage growth. She cautioned that cutting rates as markets expect could constitute a “policy error” if inflation pressures resurge. Her concerns reflect legitimate uncertainty about whether inflation will remain under control.
Governor Andrew Bailey attempted to balance these perspectives, acknowledging both the positive inflation outlook and the need for caution. He projected inflation would fall to around 2% by spring but emphasized the importance of ensuring it stays there. When asked about March, he endorsed the market’s 50-50 probability for a cut.
The economic backdrop shows GDP growth forecast at just 0.9% this year, down from 1.2% previously, with unemployment expected to reach 5.3%. Chancellor Rachel Reeves’s budget measures, including utility bill cuts and rail fare freezes from April, are projected to drive inflation down to 2.1% by mid-2026, compared to 3.4% in December. The dovish-hawkish debate centers on whether these improvements justify immediate action or continued caution.