The Bank of England held benchmark rates steady following the US Federal Reserve’s decision to continue its pause. The BOE said the Monetary Policy Committee voted 5 to 4 to hold the Bank Rate at 5.25%. The minority preferred to increase rates by 25 basis points (bps) to 5.5%.
At the same time, the MPC voted unanimously on QT with a reduction of UK government bond purchases by £100 billion over the next twelve months.
The Bank noted that twelve-month CPI inflation fell from 7.9% in June to 6.7% in August as it continues to march toward its 2% target rate.
UK GDP was said to have declined by 0.5% in July, with expectations for DGP to rise only a bit in Q3 2023.
The MPC said it would continue to monitor closely markets and inflation adding that it needs to be “sufficiently restrictive” to get inflation to its target percentage.
In a letter to the Chancellor of the Exchequer, Bank Governor Andrew Bailey noted that food price inflation has apparently peaked and core goods inflation seems to be on the decline. At the same time, external pressures remain elevated – like the ongoing ware in Ukraine which has impacted commodity prices.
The MPC will review rates next on November 2, 2023.