The Bank of England in December 2024.
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LONDON – The Bank of England ended its final meeting of the year on Thursday by deciding to leave interest rates unchanged after inflation in the United Kingdom rose to an eight-month high.
Analysts had widely expected a rate peg at the December meeting as policymakers remain concerned stubborn services inflation and wage growth.
The BOE has already increased its key interest rate by two quarter percentage points this year from 5.25% to 4.75%.
Contrary to expectations, three members of the Monetary Policy Committee voted to cut interest rates, while six voted to maintain them. Economists polled by Reuters had predicted only one member would vote for a cut.
Sterling pared gains against the U.S. dollar immediately after the BOE announcement, trading 0.2% higher at 12:22 p.m held a wide rally on Wednesday according to the Federal Reserve Cut interest rates by a quarter point however, signaled a more hawkish outlook for 2025. It gave up some gains on Thursday morning.
GBP/USD.
In a statement, the BOE said the rise in UK headline inflation in November was slightly higher than previously expected to 2.6%, adding that inflation in the services sector remained “elevated”.
BOE officials also lowered their economic forecast for the fourth quarter of 2024, now forecasting no growth, compared to the 0.3% expansion forecast in the November report.
UK growth figures have been weaker than expected in recent months and the economy has contracted surprising decline of 0.1% in October.
Money markets this week trimmed their bets on the pace of further cuts next year following the release of data on inflation and wage growth in the summer, now pricing in around 50 basis points of impending cuts, compared to the forecast of around 70 basis points. Value of cuts on Monday.
“The split vote and the dovish tone of the minutes suggest that a rate cut in February remains in play, if not a done deal,” Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said in an email. Emailed comments.
“The Bank of England risks putting itself in a corner over the pace of monetary easing because, with inflation likely to rise, the timing of future rate cuts could become increasingly complex, particularly if stagflation fears become a reality.”
This is a breaking news story and will be updated shortly.
