The Bank of
England (BoE) announced on Thursday its Monetary Policy Committee (MPC) voted
by a majority of 8-1 to remain the Bank Rate unchanged at 5.25 per cent
at its March meeting. Meanwhile, one MPC member preferred to cut the
Bank Rate by 25 basis points. The outcome was in line with investors’ expectations.
In its policy statement,
the BoE notes:
- UK GDP and
market sector output are expected to start growing again during H1;
- Business
surveys remain consistent with an improving outlook for activity;
- UK labour
market has continued to loosen but remains relatively tight by historical
standards;
- Although
still elevated, nominal wage growth has moderated across a number of measures;
- Services
consumer price inflation has declined but remains elevated, at 6.1% in February;
- Most
indicators of short-term inflation expectations have continued to ease;
- CPI inflation
is projected to fall to slightly below the 2% target in 2024 Q2, marginally
weaker than previously expected;
- Services
price inflation is expected to fall back gradually;
- Restrictive
stance of monetary policy is weighing on activity in the real economy, is
leading to a looser labour market and is bearing down on inflationary
pressures. Nonetheless, 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 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;
- MPC will keep under review for how long Bank Rate should
be maintained at its current level