On Thursday 1st February 2024, the Bank of England voted on holding interest rates at 5.25% in a three-way split
For the fourth time in a row, the Monetary Policy Committee (MPC) have decided against increasing the base rate. This comes as a disappointment to borrowers, such as mortgage holders, hoping to see a drop in borrowing costs. However, the announcement comes bang in line with city forecasts. Economists had predicted that the rate would be held again due to the rise of inflation from 3.9% to 4% in December.
Whilst previous votes have had a clear majority, the MPC appeared to be split in what it wanted to do today. In a rare move, two members of the Bank’s MPC preferred to increase rates by 0.25%, whilst one member voted to reduce rates by 0.25%. This was the first three-way split since the financial crash in 2008 and the first time since the pandemic in 2020 that a member of the rate-setting committee had voted for a cut.
Commenting on the interest rate decision, Andrew Bailer, Governor of the Bank of England said: “Today we have decided to hold interest rates at 5.25%. We have had good news on inflation over the past few months. It has fallen a long way, from 10% a year ago to 4%. But we need to see more evidence that inflation is set to fall all the way to the 2% target, and stay there before we can lower interest rates.”
Governor Andrew Bailey also told reporters that “it was not as simple as inflation returns to target in the spring, and the job is done”. He noted that the Bank’s approach was working, but it needed to keep “monetary policy sufficiently restrictive for sufficiently long, nothing more, nothing less.” to tackle higher prices. When questioned on how long rates will remain at this level, he said: “We will not maintain it for any longer than we need to do to achieve the objective of inflation being held at 2% at a sustained basis.”
The Monetary Policy Committee will be holding their next meeting on Thursday 21st March 2023.
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