Oil spike from renewed Middle East hostilities has revived internal debate at
the Bank of England over whether to raise rates before year-end. The MPC meets
later this week to review Bank Rate and the pace of balance‑sheet reduction. A
bond-market selloff is adding pressure to Prime Minister Andy Burnham’s
government ahead of the Oct. 28 budget. Market pricing shows under a one‑third
chance of a rate hike at Thursday’s September policy meeting, but higher
energy-driven inflation and relatively firm UK GDP are likely to sharpen
discussion over how long Bank Rate can remain at 3.75%. Deutsche Bank economist
Sanjay Raja: “The Bank’s patience may be running out; the case for inaction is
slowly eroding.”
