The Bank of
England (BoE) announced on Thursday its Monetary Policy Committee (MPC) voted
by a majority of 6-3 to keep
the Bank Rate unchanged at 4.75 per cent
at its December meeting. Meanwhile, three MPC members preferred to decrease the benchmark rate by 25 basis points. The outcome was in line with markets’ expectations.
In its policy statement,
the BoE notes:
- Since the
MPC’s November meeting, twelve-month CPI inflation has increased to 2.6% in
November, slightly exceeding previous expectations;
- Services
consumer price inflation has remained elevated;
- Headline CPI
inflation is expected to continue to rise slightly in near term;
- Most
indicators of UK near-term activity have declined;
- BoE expects
GDP growth to have been weaker at the end of 2024 than projected in November;
- MPC now
judges that UK labour market is broadly in balance;
- There remains
significant uncertainty around developments in labour market;
- Monetary
policy has been guided by the need to squeeze remaining inflationary pressures
out of the economy to achieve the 2% target;
- Over recent
quarters there has been progress in disinflation, although remaining domestic
inflationary pressures are resolving more slowly;
- MPC continues
to consider a range of cases for how the past global shocks that drove up
inflation may unwind;
- MPC is also
monitoring the impact on growth and inflationary pressures from measures
announced in Autumn Budget and from geopolitical tensions and trade policy
uncertainty. These developments have generated additional uncertainties around
the economic outlook;
- MPC continues
to monitor closely the risks of inflation persistence;
- A gradual
approach to removing monetary policy restraint remains appropriate;
- Monetary
policy will need to continue to remain restrictive for sufficiently long until
the risks to inflation returning sustainably to 2% target in the medium term
have dissipated further;
- MPC will
decide the appropriate degree of monetary policy restrictiveness at each
meeting