The Bank of England’s Monetary Policy Committee (MPC) voted 6-3 to raise the Bank Rate by 25 basis points in August (to 5.25%), in line with market expectations. This marked the 14th consecutive increase in interest rates.
The Bank of England’s Monetary Policy Committee (MPC) voted 6-3 to raise the Bank Rate by 25 basis points in August (to 5.25%), in line with market expectations. This marked the 14th consecutive increase in interest rates. The majority voting bloc in the MPC noted that key indicators of domestic price pressures, particularly wage growth, remained elevated, which necessitated a further tightening of monetary policy to bring inflation back down to target.
The MPC’s latest forward guidance kept open the possibility of further rate hikes to rein in persistent price pressures. Furthermore, the guidance was changed to suggest that interest rates will remain higher for longer. This adjustment is noteworthy as financial markets had previously been expecting that the Bank would cut interest rates from Q3 2024.
The Bank’s latest forecast expects that higher interest rates, weak potential supply, and waning support from fiscal policy will weigh on economic activity going forward. As a resu
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