RE: Interest Rates on Hold21 Sep 2023 12:39
44: Five members judged that maintaining Bank Rate at 5.25% was warranted at this meeting. There were signs that the labour market was loosening. The recent acceleration in the AWE was noteworthy but was not apparent in other measures of wages. Although it was important not to put too much weight on a single data point, headline and services CPI inflation had fallen back and were lower than had been expected. Regarding activity, contacts of the Bank’s Agents had become more downbeat, and the output PMI in August was now consistent with falling GDP. For most members within this group, the latest developments meant that the judgement to keep Bank Rate unchanged at this meeting rather than increase it was finely balanced. Conditions were likely to warrant a restrictive policy stance being maintained until material progress had been made in returning inflation to the 2% target sustainably. For one member, however, the risks of overtightening policy had continued to build, increasing the likelihood of output losses and volatility that would require sharper reversals of policy. Lags in the effects of monetary policy meant that sizeable impacts from past rate increases were still to come through.
45: Four members judged that a 0.25 percentage point increase in Bank Rate, to 5.5%, was warranted at this meeting. Although there were now some signs of weakening economic activity, consumer sentiment appeared to be holding up, real household incomes had started to rise, and forward-looking indicators of output had remained positive. The labour market was still relatively tight, consistent with a possible rise in the medium-term equilibrium rate of unemployment, and the pace of loosening had been slow. Measures of wage growth and services inflation had remained at rates above those consistent with meeting the 2% target sustainably in the medium term. While services CPI inflation had fallen by more than had been expected in the latest data release, this appeared to have been driven mainly by volatile components and had followed recent upside surprises. These members judged that overall there was evidence of more persistent inflationary pressures. Although the monetary stance was weighing increasingly on economic activity, a 0.25 percentage point increase in Bank Rate at this meeting was necessary to address the risks of more deeply embedded inflation persistence and bring inflation back to the 2% target sustainably in the medium term.
https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2023/september-2023
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