- Prior 5.00%
- Bank rate vote 8-1 vs 7-2 expected (Mann dissented to keep bank rate at 5.00%)
- There has been continued progress in disinflation
- But domestic inflationary pressures are resolving more slowly
- Most of the remaining persistence in inflation may dissipate quickly
- Pay and price-setting dynamics continue to normalise following the unwinding of the global shocks
- We need to make sure inflation stays close to target
- Cannot cut rates too quickly or by too much
- The combined effects of the measures announced in Autumn Budget 2024 are provisionally expected to boost the level of GDP by around 0.75% at their peak in a year’s time
- The Budget is provisionally expected to boost CPI inflation by just under 0.5% at the peak
- There remains significant uncertainty around the outlook for the labour market
- Data are difficult to interpret and wage growth has been more elevated than usual relationships would predict
- A gradual approach to removing policy restraint remains appropriate
- Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further
- To monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting
- Full statement
There’s no change to the forward guidance with the part in bold continuing to be kept in terms of guiding markets on their intentions. There were no surprises on the votes, with Mann being the only one to dissent. Meanwhile, Dhingra and Ramsden were not overly dovish in pushing for a 50 bps move as well. All in all, the decision and language is more or less expected.
The statement also acknowledges the continuation in the disinflation process. However, the BOE is warning that price pressures might still prove to be more stubborn than anticipated.
As things stand, a lot will rest on the next two UK CPI reports on 20 November and 18 December before we get to the next policy decision on 20 December itself.