12:00 PM BST, United Kingdom - BoE Interest Rate Decision for August:
- actual 5.00%; forecast 5.00%; previous 5.25%;
The Monetary Policy Committee (MPC) has decided to reduce the Bank Rate by 0.25 percentage points to 5%, aiming to meet the 2% inflation target while supporting growth and employment. The decision was based on current and projected economic conditions, including a rise in inflation due to past energy price changes and persistent domestic inflationary pressures. The MPC emphasizes a forward-looking approach to maintain restrictive monetary policy until inflation risks are sufficiently mitigated.
Key Points:
- MPC voted 5–4 to reduce Bank Rate to 5%. Four members preferred maintaining the rate at 5.25%.
- Twelve-month CPI inflation at 2% in May and June, expected to rise to 2.75% in the second half of the year.
- Private sector earnings growth fell to 5.6%, and services CPI inflation declined to 5.7%.
- GDP has picked up but underlying momentum is weaker.
- MPC focuses on second-round effects of inflation, monitoring a broad range of indicators.
- Headline inflation expected to decrease, leading to weaker pay and price-setting dynamics.
- Margin of slack anticipated as GDP falls below potential and the labor market eases.
- Persistent inflationary pressures may persist due to higher demand and structural factors.
- Monetary policy will remain restrictive until inflation risks dissipate.
- CPI inflation projected to fall to 1.7% in two years and 1.5% in three years.
- Risks of inflation persistence remain, influenced by domestic wage and price-setting factors.
