21.09.2023 13:37:42

Bank Of England Surprises With No Change In Bank Rate

(RTTNews) - The Bank of England kept its benchmark rate unchanged unexpectedly on Thursday, thus having a pause in the rate hike cycle that saw interest rates being raised in 14 consecutive sessions.

The Monetary Policy Committee of the BoE headed by Andrew Bailey voted 5-4 to maintain the bank rate at 5.25 percent. Markets widely expected a quarter point increase.

Five members of the committee judged that retaining the rate at 5.25 percent was warranted at this meeting as there were signs that the labor market was loosening. Four members voted to lift the bank rate by 25 basis points citing evidence of more persistent inflationary pressures.

"Monetary policy would need to be sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term," the bank said. "Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures," the bank added.

The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes, and financed by the issuance of central bank reserves, by GBP 100 billion over the next twelve months, to a total of GBP 658 billion.

Bank staff forecast the economy to grow only slightly in the third quarter of 2023 and underlying growth in the second half of the year is also projected to be weaker than expected.

CPI inflation is forecast to fall significantly further in the near term. However, services price inflation is expected to remain elevated in the near term, with some potential month-to-month volatility.