BoE opts to keep its Bank Rate unchanged at 5.25%. The decision, however, came after a razor-thin 5-4 vote that showed divisions within the central bank’s ranks. Notably, the influential figures – Governor Andrew Bailey, Deputies Ben Broadbent and Dave Ramsden, along with Chief Economist Huw Pill, sided with Swait Dhingra in favour of retaining the rate at its current level.
In its accompanying statement, BoE underscored the need for a vigilant approach, stating, “Monetary policy will need to be sufficiently restrictive for sufficiently long”. Furthermore, the central bank emphasized its readiness to consider more rate hikes, signaling that “Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.”
Amid these cautions, Bank’s staff adjusted their growth outlook, expecting only a slight uptick in GDP for the third quarter of 2023. They also anticipate that the underlying growth for the second half of the year will likely underperform previous expectations.
On the inflation front, the bank projected a notable decline in CPI in the near future. Despite recent spikes in oil prices, the central bank expects this drop due to “lower annual energy inflation” and anticipated further reductions in food and core goods prices.
Yet, the BoE warned that the services sector could buck this trend, foreseeing that “Services price inflation, however, is projected to remain elevated in the near term, with some potential month-to-month volatility.”
Also, in a unanimous decision, the MPC agreed to reduce the stockpile of UK government bond purchases, cutting it down by GBP 100B over the coming year, bringing the total to GBP 658B.
