The central bank said inflation, currently at 3.4 per cent, is expected to fall back to its 2 per cent target from April, earlier than projected in November
The Bank of England on Thursday kept its benchmark interest rate unchanged at 3.75 per cent, but a narrow 5-4 vote exposed growing divisions within the Monetary Policy Committee (MPC) over the timing of the next cut.
Governor Andrew Bailey was among the five members who voted to hold, even as four policymakers backed a 25 basis points reduction.
“My policy decision is based on accumulating evidence. Despite all the uncertainties in the world, we are not currently facing a situation in which monetary policy is being hit by big new shocks,” Andrew Bailey said.
The central bank said inflation, currently at 3.4 per cent, is expected to fall back to its 2 per cent target from April, earlier than projected in November.
However, the MPC stressed it wants clearer evidence that the fall in inflation is sustainable and not driven solely by temporary factors such as lower energy prices and recent fiscal measures.
In updated projections, the BoE trimmed its 2026 growth forecast to 0.9 per cent down from the 1.2% and raised its peak unemployment estimate to 5.3 per cent.
“Bank staff project that core goods inflation will fall to 0.9% by June 2026, slightly above its 2012–19 average. Services and food price inflation are expected to moderate to 3.3% and 2.4% respectively, close to, but still slightly above, their 2012–19 averages,” the MPC said.
“On the basis of the current evidence, Bank Rate is likely to be reduced further,” the MPC said, adding that the timing and extent of cuts will depend on how inflation and wage pressures evolve.
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