Bank of England maintains Bank Rate at 4%

At its meeting ending on September 17, the Bank of England’s Monetary Policy Committee voted by a majority of 7-2 to maintain Bank Rate at 4%. Two members voted to reduce Bank Rate by 0.25 percentage points, to 3.75%. The Committee voted by a majority of 7-2 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 70B over the next 12 months, to a total of GBP 488B. “There has been substantial disinflation over the past two and a half years, following previous external shocks, supported by the restrictive stance of monetary policy. That progress has allowed for reductions in Bank Rate over the past year. The Committee remains focused on squeezing out any existing or emerging persistent inflationary pressures, to return inflation sustainably to its 2% target in the medium term. Underlying disinflation has generally continued, although with greater progress in easing wage pressures than prices. Twelve-month CPI inflation was 3.8% in August, and is expected to increase slightly in September, before falling towards the 2% target thereafter. The Committee remains alert to the risk that this temporary increase in inflation could put additional upward pressure on the wage and price-setting process. Pay growth remains elevated, but has fallen and is expected to slow significantly over the rest of the year. Services consumer price inflation has been broadly flat over recent months. Upside risks around medium-term inflationary pressures remain prominent in the Committee’s assessment of the outlook,” the BOE stated.