The Bank of England (BoE) stated on Thursday its Monetary Policy
Committee (MPC) voted by a majority of 6-3
to keep the Bank Rate unchanged at 5.25 per cent
at its December meeting. Meanwhile, three MPC
members preferred to raise the rate by 25 basis points.
The outcome was in line with the markets’ expectations.
In its policy statement, the BoE notes:
- Based on the latest data, the BoE’s staff expects GDP growth to be broadly
flat in Q4 and over coming quarters;
- Fiscal measures in the Autumn Statement are provisionally estimated to
increase the level of GDP by around 0.25% over the coming years;
- Employment growth is likely to have softened, and there has been
further evidence of some loosening in the labour market;
- There remain upside risks to the outlook for wage growth;
- CPI inflation is expected to remain near its current rate around
the turn of the year;
- The near-term path for CPI inflation is somewhat lower than projected
in November, in part reflecting recent declines in energy prices;
- Monetary policy will ensure that CPI inflation returns to the 2%
target sustainably in the medium term;
- Since the MPC’s previous decision, CPI inflation has fallen back
broadly as expected. However, key
indicators of UK inflation persistence remain elevated;
- As anticipated, tighter monetary policy is leading to a looser labour
market and is weighing on activity in the real economy more generally;
- Given the significant increase in
Bank Rate since the start of this tightening cycle, the current monetary policy
stance is restrictive;
- MPC will continue to monitor closely indications of persistent
inflationary pressures and resilience in the economy as a whole;
- Monetary policy will need to be
sufficiently restrictive for sufficiently long to return inflation to the 2%
target sustainably in the medium term;
- MPC continues to judge that
monetary policy is likely to need to be restrictive for an extended period of
time;
- Further tightening in monetary
policy would be required if there were evidence of more persistent inflationary
pressures