FX.co ★ BoE Hold Rates at 4%

On November 5, the Bank of England's Monetary Policy Committee (MPC) decided by a 5–4 vote to maintain the Bank Rate at 4%, aligning with market predictions. Four members of the committee advocated for a reduction of 25 basis points to 3.75%, indicating increasing support for interest rate cuts. The policymakers highlighted that while Consumer Price Index (CPI) inflation has reached its peak, underlying disinflation is underway, aided by the still-restrictive monetary policy, moderate wage growth, and easing inflation in the services sector. Additionally, the combination of a sluggish economy and increasing slack in the labor market is contributing to this disinflation trend. The committee noted that the risks related to reaching the 2% inflation target are now more balanced: concerns about persistent inflation have diminished, whereas downside risks due to weak demand have become more pronounced. However, they emphasized the necessity of acquiring further evidence on both these fronts. Since previous rate reductions have decreased the restrictiveness of policy, any future rate cuts will be contingent upon forthcoming data. Should the disinflation trend continue as anticipated, the Bank Rate is expected to decrease gradually.