BoE opted to keep the Bank Rate unchanged at 5.00%, as expected, with an 8-1 vote. Swati Dhingra, a known dove, was the only member voting for a 25bps rate cut. Deputy Governor Dave Ramsden, who has consistently supported cuts since May, chose not to vote for a reduction this time.
In its statement, BoE noted that UK economic indicators have shown “limited news” relative to expectations outlined in the August MPR. Inflation stood at 2.2% in August and is anticipated to rise to around 2.5% by year-end as the effects of last year’s energy price declines drop out of the annual comparison. Services inflation remains notably elevated at 5.6%, while private sector wage growth slowed to 4.9% in the three months to July.
BoE emphasized that “absence of material developments”, it will continue to follow a “gradual approach” to unwinding policy restrictions. Monetary policy is expected to stay restrictive for a sufficiently long period until inflation risks subside, ensuring it returns to the 2% target. The central bank reaffirmed its commitment to closely monitor inflation persistence and determine the necessary level of restrictiveness “at each meeting.”
