Bank of England maintains Bank Rate at 5.25%

In its Monetary Policy Summary, The Bank of England stated: “The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 20 September 2023, the MPC voted by a majority of 5-4 to maintain Bank Rate at 5.25%. Four members preferred to increase Bank Rate by 0.25 percentage points, to 5.5%. The Committee also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes, and financed by the issuance of central bank reserves, by GBP 100 billion over the next twelve months, to a total of GBP 658 billion. In the MPC’s August most likely, or modal, Monetary Policy Report projections, conditioned on a market-implied path for Bank Rate that averaged just under 51/2% over the three-year forecast period, CPI inflation was expected to return to the 2% target by 2025 Q2. It was then projected to fall below the target in the medium term, as an increasing degree of economic slack was expected to reduce domestic inflationary pressures, alongside declining external cost pressures. The Committee had continued to judge that the risks around the modal inflation forecast were skewed to the upside, albeit by less than in May, reflecting the possibility that the second-round effects of external cost shocks on inflation in wages and domestic prices take longer to unwind than they did to emerge. The mean projection for CPI inflation, which incorporated these risks, was 2.0% and 1.9% at the two and three-year horizons respectively. Since the MPC’s previous meeting, global growth has evolved broadly in line with the August Report projections, albeit with some differences across regions. Spot oil prices have risen significantly, while underlying inflationary pressures have remained elevated across advanced economies.”