Bank of England officials laid out sharply divergent views on how the central bank should respond to a fresh energy-price shock during a Treasury Committee hearing in Westminster on Tuesday, underscoring a widening split inside the Monetary Policy Committee over the timing of any further tightening.
Governor Andrew Bailey told the committee that energy costs remain a central concern for the outlook, warning that prices "could be higher still" given ongoing disruption tied to tensions in the Middle East and added strain on global refining capacity. Bailey was joined at the hearing by Deputy Governor for Markets and Banking Sir Dave Ramsden and external MPC members Megan Greene and Alan Taylor, who each set out their own reading of the risks.
Greene made the most explicit case for pre-emptive action, arguing that five years of above-target inflation leaves the Bank with little room to tolerate a fresh shock without risking a resurgence of wage and price "catch-up" dynamics. She pointed to the collapse of a US-Iran understanding and the subsequent widening of regional conflict as the trigger for renewed volatility in energy markets, telling the committee that a Bank which moves early can still reverse course if the shock proves smaller than feared, whereas a Bank that waits risks losing control of expectations.
Ramsden offered the counterargument, acknowledging that the global inflation backdrop carries more upside risk than it did earlier in the year but cautioning against reading too much into that alone. He noted that domestic wage growth has come in below the Bank's own forecasts through the year, which he said argues for patience rather than a pre-emptive move while the Committee waits for more evidence on how the energy shock is feeding through to the domestic economy.
The exchange builds on a Monetary Policy Committee that has already shown open disagreement over the appropriate response. At its July 30 meeting, the MPC voted 6-3 to hold Bank Rate at 3.75%, with Greene joined by Catherine Mann and Huw Pill in voting for an immediate quarter-point rise to 4%. That three-strong dissent was one of the more pointed splits of the current tightening-and-holding cycle, and Tuesday's testimony indicated the disagreement has not narrowed in the weeks since.
Taken together, the hearing signals that the debate inside the MPC has shifted from whether the energy shock matters to how quickly the Bank should act on it, with Greene continuing to press the hawkish case and Ramsden representing a more cautious wing that wants further confirmation before moving. Bailey's own remarks, warning that energy prices have further room to rise, suggest the Governor sees the risk as live even if he stopped short of endorsing either camp's preferred timeline.
The testimony arrives ahead of the Bank's next scheduled policy decision later this month, when the Committee will have to weigh the competing evidence on energy prices, wage growth and second-round inflation effects that Tuesday's witnesses each cited in support of opposing conclusions.