Bank of England keeps policy rate steady at 5.25 percent
The Bank of England (BoE) has kept its policy rate steady at 5.25 percent, the highest level in the last 15 years, in line with market expectations.
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According to the statement released by the BoE, members of the Monetary Policy Committee (MPC) decided to keep the policy rate steady with a 6-to-3 vote.
The MPC minutes noted that three members voted to increase the policy rate by 25 basis points to 5.50 percent.
The minutes stated that conditions regarding the path indicated by the bank suggest the policy rate will remain at 5.25 percent until the third quarter of 2024 and will be gradually reduced to 4.25 percent by the end of 2026. It was also conveyed that gross domestic product is expected to remain flat in the first half of the transition period, with an increase in economic easing expected from the beginning of next year.
The minutes indicated that inflation is projected to return to the 2 percent target by the end of 2025, with estimates suggesting it will fall below this target thereafter.
Recalling that the British economy contracted by 0.3 percent in October, the minutes pointed to signs of some easing in the labor market.
The minutes further noted that core inflation in the country is expected to remain at its current level by the end of the year, while service sector inflation is projected to rise temporarily in January of next year due to base effects. It was also emphasized that the British economy is expected to record 0.5 percent growth as of the third quarter of this year, and that there is an increasing divergence in growth rates among developing economies.
Despite tensions in the Middle East, the minutes stated that the price of a barrel of Brent crude oil has fallen by approximately 17 percent to 75 dollars since the MPC's November meeting, noting that declining global demand has been a factor in this decrease.
The minutes included the following statement: "Core goods price inflation is expected to fall further in the coming quarters. This reflects diminishing cost pressures, including base effects and the decline in global goods price inflation."
In the UK, the Consumer Price Index (CPI) slowed more than market expectations in October, reaching 4.6 percent on an annual basis. The BoE aims to bring inflation down to 2 percent and maintain it at that level.