BOE cuts bank rate by 25 bps to 4.75%, as expected

• Prior 5.00%
• Bank rate vote 8-1 vs 7-2 expected (Mann dissented to keep bank rate at 5.00%)
• There has been continued progress in disinflation
• But domestic inflationary pressures are resolving more slowly
• Most of the remaining persistence in inflation may dissipate quickly
• This as pay and price-setting dynamics continue to normalise following the unwinding of the global shocks
• The combined effects of the measures announced in Autumn Budget 2024 are provisionally expected to boost the level of GDP by around 0.75% at their peak in a year’s time
• There remains significant uncertainty around the outlook for the labour market
• Data are difficult to interpret and wage growth has been more elevated than usual relationships would predict
• A gradual approach to removing policy restraint remains appropriate
• Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further
• To monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting
• Full statement

This article was written by Justin Low at www.forexlive.com.