The head of the Bank of England, Andrew Bailey, said that a further increase in the interest rate is not inevitable. However, he warned that it is too early to be sure about the future direction of monetary policy.
At the first meeting in 2023, the Bank of England raised the interest rate by 50 basis points, to 4% from 3.5% per annum, as most analysts expected. The rate was raised following the results of the tenth meeting in a row and reached its maximum value since 2008. In December, the Bank of England also raised its rate by 50 basis points, and in November — by 75 basis points. Meanwhile, following the results of the February meeting, the Bank of England stated that "if necessary, it will respond decisively" to signs of further inflationary pressure, and "a further increase in the bank rate may be required."
According to the latest official data, consumer prices rose by 10.1% per annum in January after rising by 10.5% per annum in December. It marks a third consecutive month of slowing inflation and the lowest rate since September 2022. Economists had expected CPI growth of 10.3% per annum. Meanwhile, core CPI - which excludes energy, food, alcohol and tobacco - rose 5.8% per annum after rising 6.3% per annum in December. This was the weakest growth since June 2022. Consensus estimates suggested an increase by 6.2% per annum. On a monthly basis, the consumer price index fell by 0.6%, offsetting a 0.4% increase in December. Economists had expected a 0.4% decline in prices in January. The Bank is forecasting that the consumer price index will fall to about 4% by the end of the year – but that is based on a lack of additional shocks for the UK and wider global economy.
"The future steps of the Bank of England are not a foregone conclusion, and if the situation requires it, some further increase in the interest rate may be appropriate," Bailey said, adding that since the February meeting of the Central Bank, the economy had developed largely as expected.
Against the background of recent statements by the head of the Bank of England, market participants slightly trimmed bets on the likelihood of a 0.25% rate rise at the March meeting, but still expect that rates will continue to rise and reach a peak of 4.75% in the second half of the year.