Bank rate Held at 5.25% – February 2024
The Bank of England’s Monetary Policy Committee (MPC), dedicated to maintaining the 2% inflation target and fostering sustainable growth and employment, has concluded its meeting on January 31, 2024.
The MPC voted with a 6-3 majority to keep the Bank Rate at 5.25%. Within the committee, there were differing views: two members advocated for a rate increase to 5.5%, while one favoured a reduction to 5%.
The decision is grounded in the Committee’s updated economic projections, as outlined in the February Monetary Policy Report. These forecasts are based on an anticipated decline in the Bank Rate from the current 5.25% to about 3.25% by the end of the forecast period. This marks a significant adjustment from the previous predictions made in the November Report.
December 2023 saw a drop in the Consumer Prices Index (CPI) inflation to 4.0%, lower than the expectations set in the November Report. This decline was widespread, affecting fuel, core goods, and services prices. Wage growth, though still high, is showing signs of decline.
CPI inflation is projected to align temporarily with the 2% target in the second quarter of 2024, followed by a rise in the latter half of the year. This fluctuation is largely attributed to the changing impact of direct energy prices on inflation. By the end of 2024, CPI inflation is projected at around 2.75%, remaining above the target for the majority of the forecast period due to enduring domestic inflationary pressures.
If the Bank Rate remains fixed at 5.25%, CPI inflation is expected to fall significantly below the 2% target from the fourth quarter of 2025, as per the Committee’s modal projection conditioned on declining market rates.
