Will the BOE decision today come back to haunt them in the future?

<p>The BOE decision to not hike rates today might seem warranted to some extent but it might just end up being a lesson in history if things don't go their way. The inflation report this week did show signs of slowing inflation but at 6.7%, the UK still sits atop the throne in terms of the inflation ranking among major economies:</p><p>*Japan data is an estimate, to be released on 22 September</p><p>And the thing to note about all of this is that the BOE is pausing at a time when the economy is beginning to worsen significantly. Yes, that is definitely the prudent step. But when you take into account that markets basically gave them a free pass to sneak in one more rate hike today, it could end up being an opportunity missed for the central bank.</p><p>I mean if Q4 conditions end up being as bad or worse than Q3, the argument for a rate hike in November might look like a poor reflection of how the BOE is managing their policy settings. And if that is the case, they risk overtightening into a rapidly declining economy and could just send it over the edge and bringing about a hard landing.</p><p>To keep things short, this was perhaps the last chance that the BOE might get to tighten policy further and they did not take it.</p><p>And so, therein lies the risks of stagflation in the UK economy with Bailey &amp; co. maybe having no ways of resolving that situation.</p>

This article was written by Justin Low at www.forexlive.com.