BoE raises Bank Rate by 75bps to 3.00%. The decision was made by 7-2 votes. Swati Dhingra voted for 50bps hike while Silvana Tenreyro voted for just 25bps hike.
Tightening bias is maintained as “should the economy evolve broadly in line with the latest Monetary Policy Report projections, further increases in Bank Rate may be required for a sustainable return of inflation to target, albeit to a peak lower than priced into financial markets.”
But there are “considerable uncertainties” around the outlook. If outlook suggests more persistent inflation pressures, the Committee will “respond forcefully”.
In the updated central economic projections, four-quarter GDP is projected to contract -.19% in 2023 Q4, and then -0.1% in 2024 Q4, before growing again in 2025 Q4. CPI is projected to peak at 10.9% in 2022 Q4, then slow to 5.2% in 2023 Q4, and 1.4% in 2024 Q4. Unemployment rate is projected to rise notably from 3.7% in 2022 Q4 to 4.9% in 2023 Q4,5.9% in 2024 Q4, and then 6.4% in 2025 Q4.
