Bank of England’s No Change Decision Today More Finely Balanced Than 7-2 Vote Suggests
June 20, 2024
News came yesterday that British CPI inflation had fallen to a 34-month low and target-matching 2.0%. The Bank of England’s 7-2 vote in favor of maintaining a 5.25% base rate drew dissents from the same two policymakers who wanted a 25-basis point initial reduction at the prior policy review. However, within the majority, which preferred to see data strengthening their confidence that inflation in the medium term would stabilize around 2%, there were some policymakers whose decision to join the majority was “finely balanced.” The base rate has been at 5.25% since last August, having been raised by 15 basis points at the final 2021 review, 325 bps during 2022 and 175 bps last year. Due to energy base rate effects, officials believe that inflation will be higher than now at the end of 2024, and economic growth so far this year has evolved somewhat more strongly than anticipated. Although now loosening, the labor market is still considered tighter than what would be consistent with persistent 2% consumer price inflation.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of England
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