19th Jun 2025 12:12
(Alliance News) - The Bank of England left interest rates unmoved on Thursday, though the vote split had a more dovish tilt than expected.
The BoE left bank rate unmoved at 4.25% on Thursday, as expected. According to the central bank, six policymakers, Governor Andrew Bailey included, backed the move.
Three would have preferred a 25 basis point cut to 4.00%, namely Swati Dhingra, Dave Ramsden and Alan Taylor.
"There has been substantial disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations.
"This has allowed the MPC to withdraw gradually some degree of policy restraint, while maintaining bank rate in restrictive territory so as to continue to squeeze out existing or emerging persistent inflationary pressures," the BoE said.
The BoE said there are "two-sided risks to inflation". It once again affirmed a "gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate".
Numbers on Wednesday showed UK consumer prices index rose by 3.4% in May from a year before, slowing from annual growth of 3.5% that was reported for April. The May inflation figure was in line with FXStreet consensus.
Earlier in June the ONS reported that the UK's headline inflation figure was 0.1 percentage point too high for April due to an error in the vehicle tax data collected. As is standard practice, the April figure has not been revised, the ONS explained.
Excluding this adjustment, the headline rate of inflation would have been unchanged in May from April.
The BoE added: "Twelve-month CPI inflation increased to 3.4% in May from 2.6% in March, in line with expectations in the May monetary policy report. The rise was largely due to a range of regulated prices and previous increases in energy prices. Consumer price inflation is expected to remain broadly at current rates throughout the remainder of the year before falling back towards target next year.
"Furthermore, global uncertainty remains elevated. Energy prices have risen owing to an escalation of the conflict in the Middle East. The committee will remain sensitive to heightened unpredictability in the economic and geopolitical environment, and will continue to update its assessment of risks to the economy."
The central bank said some measures of volatility in financial markets ebbed since its previous meeting, though they remain "elevated overall in light of continuing geopolitical and trade policy uncertainty".
"Since the MPC's May meeting, the US administration had made progress in negotiating trade deals with the UK and China. The reduction in tariffs with China had reduced the US average effective tariff rate by just over a third. However, the future configuration of tariffs remained highly uncertain, with potential changes in tariff policy continuing to pose risks to global trade. Indices of trade policy uncertainty had also remained at elevated levels," the BoE added.
Sterling traded at USD1.3415 at 1210 BST on Thursday, down from USD1.3429 just before the decision.
By Eric Cunha, Alliance News news editor
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