The Bank of England has been a fierce defender of central bank independence at a time when the US Federal Reserve is under pressure from Donald Trump’s White House.

Yet, less than 24 hours after Fed chairman Kevin Warsh showed steel by raising American borrowing costs, Governor Andrew Bailey and rate-setters on the Monetary Policy Committee (MPC) showed vulnerability.

The Old Lady had signalled that bank rate would be held at 3.75 per cent.

It was too much to expect that the Bank would react to worsening conditions in oil markets and threat of an upsurge in inflation in the autumn and raise rates now.

The case was made by chief economist Huw Pill. For the second month in a row, he was on the losing side of a six-to-three vote to stand still.

Pill said the ‘magnitude and persistence of events in the Middle East have proved stronger than in July’ and fears second-round impact on consumer prices.

With headline prices on the rise at 3.1 per cent and above the Government’s 2 per cent target, the case for acting now is overwhelming. Forecasts for food prices and this winter’s energy costs are dire.

Moreover, while private sector wages are under control, the same cannot be said for the nation’s ever-bigger state sector.

Trades union pressure is rampant, as symbolised by the extra £500million of taxpayers’ money found for teachers.

As the state sector starts to expand exponentially with the railways, steel and, potentially, water supplies tracking back into the public’s hands it will be hard for Labour, financed by the unions, to hold back the tide.

Workers in the wealth-creating section of the economy have less bargaining power, but willingness to accept real wages on hold or a cut is limited. The record of the MPC defying the advice of the Bank’s chief economist is not good.

Andy Haldane was a lonely voice for higher rates and less money-printing in the run-up to the inflation peak of 11.1 per cent in October 2022. If a rise in bank rate will be necessary this year, then why delay?

Among analysts, as contentious as the rate hold will be the half-turn on quantitative tightening.

Under pressure from left and right to slow or halt its policy of offloading gilts, causing higher bond yields, the Bank changed tack.

It has delivered some modest help to the Office for Budget Responsibility and Chancellor John Healey ahead of the Budget by taking pressure off surging ten- and 30-year gilt yields.

Bailey has stoutly defended the Bank of England’s policy of ridding its balance sheet of gilts bought in the pandemic and the Ukraine war.

His argument is that by clearing out the Bank’s holdings – the only G7 government to pursue such a policy – it was making sure it has capacity to deal with the next crisis.

It has been a lonely place despite all manner of risks such as geopolitics, rampant AI financing and fears of a private credit meltdown. 

The Bank has decided to hold back for the moment, before resuming the tightening at a predictable rate of £20billion a year.

Some £120billion of longer dated stuff, which matures in 2049, will remain on the balance sheet backing banknote issue.

There is no hiding the fact that, behind all the technical claptrap, Governor Bailey has sounded the retreat.

Anything which helps to lower the Government’s borrowing costs, deadweight money, is welcome.

The fundamental problem is that we have a tax-and-spend Government which shows no capacity to take a meat axe to index-linked welfare and pension spending.

The decision of the Competition and Markets Authority to probe the $25billion merger of Dulux paint maker AkzoNobel with Pennsylvania rival Axalta is positive.

Akzo is inheritor of ICI’s brilliant laboratories in Slough and Gateshead.

Over two decades of Dutch ownership the facilities have been the source of innovation in coatings and other tech.

Unless regulators and the Government win assurances that the UK’s scientific edge is preserved, the deal would be a fatal loss to British and Dutch makers.