The Bank of England’s Monetary Policy Committee (MPC) set monetary policy to meet the 2 percent inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 13 December 2023, the MPC voted by a majority of 6–3 to maintain Bank Rate at 5.25 percent. Three members preferred to increase Bank Rate by 0.25 percentage points, to 5.5 percent.
In the MPC’s November Monetary Policy Report projections, conditioned on a market-implied path for Bank Rate that remained around 5.25 percent until 2024 Q3 and then declined gradually to 4.25 percent by the end of 2026, GDP was expected to be broadly flat in the first half of the forecast period, in part reflecting relatively weak potential supply, and an increasing degree of economic slack was expected to emerge from the start of next year. In the most likely, or modal, projection, CPI inflation returned to the 2 percent target by the end of 2025 and fell below the target thereafter. The Committee continued to judge that the risks to its modal inflation projection were skewed to the upside, such that the mean projection for CPI inflation was 2.2 percent and 1.9 percent at the two and three-year horizons.
Since the MPC’s previous decision, CPI inflation has fallen back broadly as expected, while there has been some downside news in private sector regular AWE growth. However, key indicators of UK inflation persistence remain elevated. As anticipated, tighter monetary policy is leading to a looser labor 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. At this meeting, the Committee voted to maintain Bank Rate at 5.25 percent. http://tinyurl.com/32j6s9kr
Source: IBP