19th Sep 2024 12:20
(Alliance News) - The Bank of England on Thursday left interest rates unchanged and hinted at a gradual pace of easing of monetary policy in the months ahead.
At its September meeting, the BoE's Monetary Policy Committee voted by a majority of 8 to 1 to maintain bank rate at 5%. Swati Dhingra voted for a 25 basis points cut.
"The current policy stance was judged to be appropriate. For most members, in the absence of material developments, a gradual approach to removing policy restraint would be warranted," the BoE said in a statement.
At its August meeting, the BoE's Monetary Policy Committee voted 5-4 to cut bank rate by 25 basis points to 5.00%. In its previous seven meetings, it had voted to keep bank rate at the 16-year high of 5.25%.
In a statement, the BoE said there has been limited news in UK economic indicators.
As a result, and "in the absence of material developments, a gradual approach to removing policy restraint remains appropriate", the BoE commented.
"Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further," the BoE added.
The BoE expects CPI inflation to increase to around 2.5% towards the end of this year as declines in energy prices last year fall out of the annual comparison. Services consumer price inflation remains "elevated", it noted.
Bank staff now expected GDP growth of 0.3% in the third quarter, marginally weaker than the 0.4% rate that had been incorporated in the August report.
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 GBP100 billion over the next 12 months, to a total of GBP558 billion.
The decision comes a day after the US Federal Reserve delivered a jumbo half-point cut and signalled that further reductions would come before the end of the year.
The BoE's decision also followed broadly in line CPI figures for August although services inflation remained stubbornly high.
UK annual consumer price inflation remained at 2.2% last month, though services price growth picked up, reinforcing expectations that the Bank of England will leave rates unmoved later this week.
Numbers from the Office for National Statistics on Wednesday showed the annual rate of consumer price inflation landed in line with the FXStreet cited consensus of 2.2%. In July, the pace of consumer price growth picked up to 2.2% from 2.0% in June and May. The Bank of England has a 2.0% inflation target.
On-month, consumer prices rose 0.3%, following a 0.2% fall in July from June.
On-year, core consumer prices rose 3.6% in August, picking up speed from 3.3% in July and beating consensus of 3.5%.
Meanwhile, services prices rose 5.6% on-year in August, accelerating from 5.2% in July. Stubborn services price growth has been in focus in recent months.
By Jeremy Cutler, Alliance News reporter
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