(Finance) – The Monetary Policy Committee (MPC) of Bank of England (BoE) has voted by a 6-3 majority to keep the key interest rate at 5.25%, meeting market expectations. Three members would have preferred to increase the bank rate by 0.25 percentage points, to 5.5%.
“We have come a long way this year. Cost pressures have eased and the restrictive stance of monetary policy is helping to reduce inflation – wrote the governor Andrew Bailey in a letter to the Chancellor of the Exchequer Jeremy Hunt – So today the MPC voted to keep the rate at 5.25%. But we still have a long way to go. We will watch the data carefully and keep interest rates high enough for long enough to ensure inflation falls to the 2% target.”
The BoE highlights that the GDP of the United Kingdom remained stable in the third quarter of 2023, in line with the projections of the November Report, and fell by 0.3% in October. Based on the latest official data and surveys, Bank staff expect GDP growth to be broadly flat in the fourth quarter and subsequent quarters.
L’CPI inflation over twelve months it fell sharply from 6.7% in September to 4.6% in October, with service price inflation falling to 6.6%.
“CPI inflation is expected to remain close to the current rate towards the end of the year – we read in the statement released at the end of the meeting – In particular, services inflation is expected to increase temporarily in January, in connection with base effects resulting from unusually weak price movements earlier this year, before start tapering off later. The near-term path of CPI inflation is slightly lower than forecast in the November Report, partly reflecting the recent decline in energy prices.”
The MPC will “continue to closely monitor indications of persistent inflationary pressures and the resilience of the economy as a whole, including a range of measures of underlying tightness in labor market conditions, wage growth and job inflation.” prices of services – it is underlined – The monetary policy will have to be sufficiently restrictive for a sufficiently long period to bring inflation back to the 2% target in a sustainable way in the medium term, in line with the Committee’s mandate”.