The Monetary Policy Committee has voted by a 7-2 majority to keep the Bank Rate at 3.75% (2 members wanted to increase it to 4%).
Global energy prices have fallen since the previous meeting, but are still higher than before the Middle East conflict, and the impact of the energy shock on the UK economy is still uncertain.
CPI inflation has fallen to 2.8% but is expected to rise as the effects of higher energy prices continue to pass through. But the labour market is continuing to loosen, and household and business interest rates are still high, which will over time reduce inflation.
Considering all of this, the Committee decided to hold the Bank Rate, but stands ready to act to ensure that CPI inflation stays on track to meet the 2% target in the medium term.
Andrew Bailey, speaking to the press, said he was encouraged by energy prices starting to fall and, although he had hoped to be at the 2% inflation target by now, he is encouraged the UK can work towards it. He said he sees willingness and commitment to getting things back online, but also mistrust which is causing uncertainty. When asked about the impact of Brexit 10 years on, he commented that while he would not pretend it had been good for Britain’s financial markets and the City of London, it had not been as detrimental as people feared.