The Bank of England has held interest rates at 4.75%, in line with expectations following the further rise in inflation announced yesterday.
The Monetary Policy Committee (MPC), which sets monetary policy to meet the 2% inflation target, voted by a majority of 6–3 to maintain Bank Rate at 4.75%. Three members preferred to reduce Bank Rate by 0.25 percentage points, to 4.5%.
Alpesh Paleja, Interim Deputy Chief Economist, CBI, said: “It was widely expected that the Monetary Policy Committee would keep rates unchanged in December. Having cut twice this year, today’s announcement was in line with the gradual pace of rate cuts that the MPC has previously endorsed.
“However, the trade-off facing the Bank of England is getting more difficult. While the worst of the inflation crisis is undoubtedly behind us, we now expect the CPI rate to stay above the Bank’s 2% target for the next two years- following announcements in October’s Budget.
“Domestic price pressures also remain stubbornly high. At the same time, business surveys – including our own – show a notable deterioration in growth and hiring expectations.
“The MPC has prioritised its price stability mandate in the recent past, which aligns with a gradual loosening in monetary policy. As a result, we expect four more rate cuts over the coming year.
“However, if growth prospects worsen more materially, dampening domestic price pressures in the process, we may be looking at a scenario where rates are cut at a faster pace.”
