The Bank of England surprised no one with its decision to hike interest rates again yesterday, for the fourteenth consecutive time. In the end, it was something of a surprise, however, that a hike of only twenty-five basis points was agreed, considering a fifty-point hike was considered necessary at the last meeting.

The Bank of England’s Governor, Andrew Bailey, commented at his press conference that the MPC expects headline inflation to fall to 5% by October. He went on to say that the reason inflation is currently higher in the UK than in the Eurozone is due to a more gradual “pass-through” of energy price falls in the UK.

It is unclear at what rate energy prices will continue to fall, but he did say that he believes that the price of food and drink has peaked.

This was a little odd given the effect of the withdrawal of Russia from its agreement to allow free movement of grain through Ukraine’s Black Sea Ports and changes to taxation the UK government introduced this week that will see the price of beers, wines, and spirits rise.

Services inflation has risen since May, which is an unwelcome development. Pay growth in this sector has been stronger than the models that the Bank’s economists use predicted.

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