MNI BOE WATCH: Bank Keeps Rate At 4.75%, But Three Vote To Cut
The Bank of England left its key policy rate on hold in December, as expected by economists, although there was a surprise for financial markets as three members of the rate-setting body voted to cut rates as early as this month.
The Monetary Policy Committee voted by 6-3 to keep Bank Rate at 4.75%, but Deputy Governor Dave Ramsden, Swati Dhingra and Alan Taylor all voted to cut by 25BP.
Explaining the decision in a written comment to reporters, Governor Andrew Bailey said following the two cuts so far this year, there was a "need to make sure we meet the 2% inflation target on a sustained basis."
GRADUAL APPROACH
"We think a gradual approach to rate cuts remains right, but with the heightened uncertainty in the economy we can't commit to when or by how much we will cut rates in the coming year," Bailey added.
The dissenters said recent data pointed to sluggish demand and, given the evolving balance of risks, "a less restrictive policy rate was warranted," the minutes of the meeting noted.
The policy statement 'guidance' was little changed from the November statement, noting the MPC continued to monitor risks of inflation persistence and confirmed the gradual approach noted by Bailey, again saying that policy would need to be "restrictive for sufficiently long."
Looking at the labour market, the MPC said it now appeared "broadly in balance" and surveys by the Bank's agents suggested pay increases for 2025 looked between 3% and 4%. However, they noted the "significant uncertainty" that remained around labour market developments.
The MPC pointed to continued progress in disinflation, particularly as previous external shocks have abated, but they warned that "remaining domestic inflationary pressures are resolving more slowly."