Monthly briefing · 4 September 2026
The month in six numbers, and the argument they will not settle
This is the map we pin above the desk before we write anything longer. Sources are the Bank of England, the ONS labour market release of 18 August, and the Commons Library notes issued at the end of July.
Bank Rate
3.75%
Held. Next decision 17 September. July vote 6–3 for no change.
CPI
2.9%
June print 2.6%; Bank website now shows 2.9%. Target remains 2%.
Q4 CPI path
~3.2%
July Monetary Policy Report central projection, energy-led.
Employment 16–64
75.1%
Apr–Jun. Down from 75.3% a year earlier.
Inactivity
20.9%
9.11 million people aged 16–64. Flat on the year.
Vacancies
707k
May–Jul. Below the pre-pandemic stock. Labour demand has cooled.
1. Monetary policy is waiting on energy, not on the labour market
The July MPC voted six to three to leave Bank Rate at 3.75 per cent, the level it has occupied since December 2025. Three members wanted a quarter-point rise. Markets have, at various points this summer, priced one or two hikes over the next year. The Committee’s own language is more cautious: underlying disinflation has continued, the labour market has loosened, and the upside risk is a second-round effect from energy, not a domestic wage-price spiral that has already arrived.
That is why 17 September matters. If the energy shock is still passing through and services inflation is still easing, a hold remains the coherent decision. A hike would be an insurance premium against a second-round effect that the Bank itself says is not yet in the data. Insurance is not free. It lands on mortgagors, on gilt coupons, and on the Budget.
2. The labour market is no longer tight
Unemployment at 4.9 per cent, vacancies below their pre-pandemic level, real pay still only modestly positive: this is not 2022. Average weekly earnings including bonuses were up 4.1 per cent in cash terms in the three months to June, 1.3 per cent in real terms. Excluding bonuses the real rise was 0.7 per cent. That is not a wage explosion. It is a labour market that has stopped overheating and has not yet found a new expansion.
3. Inactivity is the supply-side story that fiscal policy keeps postponing
Nine million people aged 16 to 64 are economically inactive. The rate, 20.9 per cent, has barely moved in a year. Among 50- to 64-year-olds it is 25.7 per cent. Long-term sickness remains the category that will not recede on its own. Treat the NHS waiting list as a labour-market instrument or stop pretending the participation rate is a mystery.
4. Productivity data are arguing with each other
Tax records and Workforce Jobs imply output per hour growing at about 1.1 per cent a year over the two years to the second quarter. The Labour Force Survey still points the other way. The Office for Budget Responsibility has marked its medium-term assumption down toward 1 per cent, which at least now rhymes with the better data. The level is still about 5 per cent below the pre-pandemic path. A rebound is not a recovery of what was lost.
5. Housing and gilts sit under every other debate
Housebuilding is still running below any serious reading of household formation. The Autumn Budget of 2025 lifted the tax take to a post-war high as a share of GDP and still left the Chancellor staring at a gilt market that no longer finances the state at emergency rates. Debt interest is a first-order line, not a residual.
This briefing will be replaced in full at the start of October. The essays remain.