Oliver Mangan: All eyes on energy prices for central banks to hold line against interest rate hikes

The view of central banks remains that the spike in inflation will not be sustained and annual rates should start to fall back towards target from around the middle of next year

Christine Lagarde, President of the European Central Bank (ECB), said that despite the current inflation surge, the outlook for inflation over the medium term remains subdued. Picture: Daniel Roland/AFP via Getty Images

The November policy meeting of the Bank of England last week ended with the key official rate unexpectedly remaining unchanged at 0.1%. In the lead-up to the meeting, market expectations had hardened on the prospect of a near-term rate hike on the back of a number of comments from Bank of England governor Andrew Bailey.

The voting split was seven-to-two in favour of a no change and surprisingly, the governor did not vote for a rate hike. However, the Bank of England said if incoming data were in line with its latest forecasts, then it would be “necessary over the coming months to increase rates” to achieve its objective of returning inflation sustainably to a 2% target.