The Bank of England, by a vote of 5-4, decided to maintain its monetary policy and keep interest rates unchanged at 3.75%, as expected, at its meeting earlier today, Thursday, February 5th. Four members voted for a 25 basis point reduction in interest rates.

The Bank’s interest rate report stated that although consumer price inflation has exceeded the target of 2%, it is expected to fall to a level close to the target starting in April. This is attributed to developments in energy prices, a reversal of the restrictive monetary policy, and indicators of slowing growth and increasing slack in the labor market. Wage growth has continued to decline, and service prices have inflated.

The committee observed that, overall, the risks of sustained inflation have diminished. However, some risks to inflation remain, stemming from weak demand and the opening of the labor market. Some members expressed concern that a faster rate cut could inadvertently lead to an overly accommodative monetary policy.

The Monetary Policy Committee determines the inflation target of 2% in a way that contributes to sustainable growth and employment, and adopts a medium-term and forward-looking approach to determining the monetary stance necessary to achieve the inflation target sustainably.