MNI: BOE Keeps Policy Rate Steady And Guidance Unchanged

The Bank of England Monetary Policy Committee gave no ground in its December decision, leaving the policy rate on hold at 5.25% with three of the nine members again voting for a 25 basis point hike and with the guidance suggesting that the policy rate will stay high-for-long unaltered.

Six members voted for unchanged policy with three, Megan Greene, Jonathan Haskel and Catherine Mann backing a 25 bps hike leaving the vote split the same as at the November meeting. There had been speculation ahead of the meeting about one or more of the hikers moving to the no change camp or some tweaking of the guidance but the MPC did not shift.

The MPC still judged "that monetary policy was likely to need to  be restrictive for an extended period of time" and that further tightening would be required if there was evidence of more persistent inflationary pressures.

In the wake of activity data pointing to at best flat output in Q4 and softer earnings figures market pricing showed the Bank cutting by around 100bps in 2024. The MPC made no direct comment on market rate expectations but the central message was that policymakers would be cautious as they are concerned about inflation persistence.

TOO EARLY

For the majority on the MPC who backed no change "it was too early to conclude that services price inflation and pay growth were on a firmly downward path," the minutes stated.

They added that on both measures "inflation persistence remained higher than in other advanced economies."

One member, presumably Swati Dhingra given her public comments, dissented from the majority view while still voting for unchanged policy.

She believed that "the risks of overtightening policy had continued to build" as the lagged effects of previous hikes had still to feed through.