While the Bank of England (BoE) kept the policy rate constant at 4.75 percent in line with market expectations, it pointed out that the gradual and cautious approach to future interest rate cuts will continue.
In the statement made by the BoE, it was stated that at the Monetary Policy Committee (MPC) meeting, 6 members, including BoE President Andrew Bailey, voted to keep the policy rate constant at 4.75 percent, while 3 members expressed their opinion to reduce it by 25 basis points.
In the statement, it was reminded that annual inflation increased from 1.7 percent in September to 2.6 percent in November, and that this was an increase above expectations.
It was stated in the statement that inflation in the services sector, in particular, continues to remain high, and that headline inflation is expected to follow an upward trend in the short term.
In the statement, it was stated that the UK’s near-term economic activity data has decreased recently, and said, “We expect economic growth to remain weaker than the predicted level in November.” It was said.
The following evaluations were included in the statement, which noted that it was aimed to achieve the 2 percent inflation target in a timely and permanent manner and that, in this context, monetary policy was shaped according to the need to reduce inflationary pressures:
“Although progress has been made in reducing inflation in recent quarters, especially with the easing of previous external shocks, remaining domestic inflationary pressures are being resolved more slowly. The MPC presents a number of situations regarding how past global shocks that led to an increase in inflation may ease and therefore how persistent domestic inflationary pressures may be.” The MPC also monitors the effects of the measures announced in the UK’s Autumn Budget, geopolitical tensions and trade policy uncertainty on growth and inflationary pressures. “In this context, the MPC decided to keep the policy rate constant at 4.75 percent.”
“MPK continues to closely monitor the risks regarding the persistence of inflation.” The following statements were included in the statement in which the comment was made:
“A gradual approach to removing monetary policy constraints remains appropriate. Monetary policy will need to remain restrictive for a long enough period until the risks of inflation returning to the 2 percent target sustainably in the medium term are further reduced. At each meeting, the Board has determined that monetary policy will remain restrictive.” “will decide on the appropriate degree.”
In his post-decision assessment, Boe Governor Bailey stated that they kept the policy rate constant today, after two interest rate cuts since the summer, and said, “We need to make sure that we reach the 2 percent inflation target in a sustainable manner. We think that a gradual approach to future interest rate cuts is correct. “However, with the increasing uncertainty in the economy, we cannot make a commitment about when or by how much we will reduce interest rates next year.” he said.
BOE CLOSED 2024 WITH A TOTAL 50 BASIS POINT DISCOUNT IN TWO TIMES
BoE, which has kept the policy rate constant at 5.25 percent since August 2023, made a change for the first time after a year and reduced the policy rate to 5 percent with a 25 basis point discount in August 2024. Thus, the BoE cut interest rates for the first time since March 2020.
The bank left the policy rate constant at 5 percent at its meeting in September, in line with expectations.
At its meeting in November, BoE reduced it by 25 basis points to 4.75, again in line with market expectations. The BoE cut interest rates by a total of 50 basis points twice this year, in August and November.
The bank’s next interest rate decision will be announced on February 6, 2025.
