Andrew Sentance, a former member of the MPC, said: “Andrew Bailey… is like the Grand Old Duke of York. He marches interest rate expectations up to the top of the hill, only to march them down again today.
“The Governor has little credibility on monetary policy as a result.”
In debt markets, the Bank’s pushback against market expectations of faster action by the end of 2022 also triggered the biggest slump in two-year borrowing costs since the Brexit referendum.
JP Morgan’s UK economist Allan Monks said the Governor’s interventions since the MPC’s last meeting “have created unnecessary market volatility and will be viewed by many as a communication error”.
Mr Bailey insisted his comments had been “conditional”.
He said: “I want to be clear. None of us ever said – I never said, none of my colleagues ever said – ‘rates will go up in November’.”
Mr Bailey’s last public comments on rates were in an online panel last month.
He said: “Monetary policy cannot solve supply-side problems – but it will have to act and must do so if we see a risk, particularly to medium-term inflation and to medium-term inflation expectations.
“And that’s why we at the Bank of England have signalled, and this is another such signal, that we will have to act. But of course, that action comes in our monetary policy meetings.”
A large majority of the nine-strong MPC voted in favour of holding interest rates at their record low of 0.1pc.
Only two rate-setters, Michael Saunders and Sir Dave Ramsden, backed a rise to 0.25pc.
Doves win out
Silvia Dall’Angelo, a senior economist at the International business of Federated Hermes, said: “The meeting’s tone was more dovish than expected, with the surprise on hold decision prompting parallels with past flip-flopping moves by former Governor Mark Carney.”
However, households could still face an interest rate rise by Christmas as the minutes of the meeting warned that “it will be necessary over coming months to increase Bank Rate in order to return CPI inflation sustainably to the 2pc target”.
The final decision is likely to hinge on the state of the UK’s jobs market after the Bank chose to hold fire until the full impact of the end of the Government’s furlough lifeboat could be seen in official data before acting.
The Bank, however, signalled a lower peak in interest rates as it forecasts the Consumer Price Index – currently 3.1pc – will undershoot the 2pc target based on market expectations of rates at 1pc by the end of next year.
While inflation is set to peak at its highest since 2011 next year, the Bank also slashed growth forecasts due to post-Covid supply disruption until the end of 2022 and expects the economy to take longer to regain the ground lost to Covid.
A return to pre-pandemic peaks not expected until early next year.
Threadneedle Street now fears the economy will grow at half the pace it predicted just three months ago, slowing to just 1pc in the final three months of 2021.
