The Bank of England (BoE) unveiled on Thursday its Monetary Policy
Committee (MPC) voted by a majority of 7-2 to hike the Bank Rate from 3.50
percent to 4.00 percent at its first meeting in 2023. Most economists had anticipated
an increase of 50 basis points in the BoE’s key interest rate. Of the minority,
two members preferred to keep the Bank Rate unchanged at 3.50 percent.
In its statement, the BoE notes:
- Global consumer price inflation remains high, although it is likely to
have peaked across many advanced economies, including in UK;
- UK domestic inflationary pressures have been firmer than expected;
- UK labour market remains tight by historical standards, although it
has started to loosen and some survey indicators of wage growth have eased;
- Near-term data developments will be crucial in assessing how quickly
and to what extent external and domestic inflationary pressures will abate;
- MPC’s updated projections show CPI inflation falling back sharply from
its current very elevated level. Annual CPI inflation is expected to fall to
around 4% towards the end of this year;
- Committee continues to judge
that the risks to inflation are skewed significantly to the upside;
- Labour market remains tight and domestic price and wage pressures have
been stronger than expected, suggesting risks of greater persistence in
underlying inflation;
- Extent to which domestic inflationary pressures ease will depend on
the evolution of the economy, including the impact of the significant increases
in Bank Rate so far;
-There are considerable uncertainties around the outlook;
- MPC will continue to monitor closely indications of persistent
inflationary pressures. If there were to
be evidence of more persistent pressures, then further tightening in monetary
policy would be required;
- MPC will adjust Bank Rate as necessary to return inflation to the 2%
target sustainably in the medium term, in line with its remit