The Bank of
England (BoE) announced on Thursday its Monetary Policy Committee (MPC) voted
by a majority of 7-1 to keep the Bank Rate unchanged at 5.25 per cent
at its June meeting. Meanwhile, two MPC members preferred to cut the
benchmark rate by 25 basis points. The outcome was in line with markets’ expectations.
In its policy statement,
the BoE notes:
- 12-month CPI
inflation fell to 2.0% in May, close to the BoE’s May projection but is
expected to rise slightly in the second half of this year, as declines in
energy prices last year fall out of the annual comparison;
- UK GDP
appears to have grown more strongly than expected during the first half of this
year;
- UK labour
market continues to loosen but remains relatively tight by historical
standards;
- Collective
steer from a range of indicators of aggregate pay growth has continued to ease
in the latest data;
- 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;
- Key
indicators of inflation persistence have continued to moderate, although they
remain elevated;
- Monetary
policy will need to remain restrictive for sufficiently long to return
inflation to the 2% target sustainably in the medium term;
- 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;
- As part of the August forecast round, MPC members will
consider all of the information available and how this affects the assessment
that the risks from inflation persistence are receding. On that basis, the
Committee will keep under review for how long Bank Rate should be maintained at
its current level