On Thursday 9th May 2024, the Bank of England voted on holding interest rates at 5.25% in a majority vote.
For the sixth consecutive time, the Bank of England have voted on interest rates remaining unchanged at 5.25%.
The decision was widely expected as the Bank has been keeping inflation interest rates high in a bid to curb inflation. Whilst inflation has slowed to 3.2% (in March 2024), the rate still remains higher than had been predicted, and keeping interest rates held at 5.25% comes as a means to meet the 2% inflation target. The nine Monetary Policy Committee (MPC) members were split, with two voting to cut rates to 5% and the remaining seven voting to hold them as they are.
Amidst this decision, the Bank of England also predicts that the UK economy returned to growth in the first quarter of this year, after shrinking in the third and fourth quarters of 2023. Commenting on this, the MPC said: “Following modest weakness last year, UK GDP is expected to have risen by 0.4% in 2024 Q1 and to grow by 0.2% in Q2.”
Despite a majority vote, there were a “range of views” about the risks to the inflation outlook among the seven MPC members who voted to maintain the current interest rate. As well as this, there were several opinions about the evidence that was likely to be needed to warrant a change in base rate, indicating that some members are closer to voting for cuts than others.
Bank of England governor, Andrew Bailey, said he was “optimistic that things are moving in the right direction”, suggesting that the country is closer to seeing rate cuts. Bailey said that the committee voted to “wait and see” after a majority agreed they needed to see more evidence that inflationary pressure will remain subdued.
In a statement after the MPC’s decision to hold rates, Andrew Bailey commented: “We’ve had encouraging news on inflation and we think it will fall close to our 2% target in the next couple of months.”
The Monetary Policy Committee will be holding their next meeting on Thursday 20th June 2024.
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