The Bank of
England (BoE) stated on Thursday its Monetary Policy Committee (MPC) voted by a
majority of 6-3 to leave the Bank Rate unchanged at 5.25 per cent at its February meeting. Meanwhile, two MPC members preferred to raise the
rate by another 25 basis points and one member preferred to cut it by 25 basis
points.
In its policy statement,
the BoE notes:
- Following
recent weakness, GDP growth is expected to pick up gradually during the
forecast period;
- The UK's labour
market has continued to ease but remains tight by historical standards. Unemployment
is expected to rise somewhat further;
- CPI inflation
is projected to fall temporarily to the 2% target in 2024 Q2 before increasing
again in Q3 and Q4;
- CPI inflation
is projected to be 2.3% in two-years’ time and 1.9% in three years;
- MPC judges
that the risks around its modal CPI inflation projection are skewed to the
upside over the first half of the forecast period, stemming from geopolitical
factors;
- Monetary
policy will ensure that CPI inflation returns to the 2% target sustainably in
the medium term;
- Restrictive
stance of monetary policy is weighing on activity in the real economy and is
leading to a looser labour market;
- Risks to
inflation are more balanced;
- Key
indicators of inflation persistence remain elevated;
- Monetary policy will need to remain restrictive for
sufficiently long to return inflation to the 2% target sustainably in the
medium term in line with the MPC’s remit;
- MPC has judged since last autumn that monetary policy
needs to be restrictive for an extended period of time until the risk of
inflation becoming embedded above the 2% target dissipates;
- MPC remains
prepared to adjust monetary policy as warranted by economic data to return
inflation to the 2% target sustainably;
- MPC will
therefore continue to monitor closely indications of persistent inflationary
pressures and resilience in the economy as a whole, including a range of
measures of the underlying tightness of labour market conditions, wage growth
and services price inflation. On that basis, the MPC will keep under review for
how long Bank Rate should be maintained at its current level