The Bank of England kept the Bank Rate at 5.25% in June, with two MPC members favouring a 0.25% cut.
Inflation rate hit the 2% target in May, yet policymakers continue to advise caution to interest rate cuts. The Bank of England decided to keep the Bank Rate unchanged at 5.25% for the seventh straight meeting during its June meeting, as widely predicted by market participants.
Seven members of the Monetary Policy Committee voted to keep rates unchanged, while Swati Dhingra and Dave Ramsden favoured a 0.25 percentage point reduction, bringing the rate to 5%. In its statement, policymakers noted that the restrictive monetary policy is weighing on real economic activity, leading to a looser labour market and curbing inflationary pressures.
Despite the labour market easing, the Bank of England highlighted that it remains tight by historical standards. The Monetary Policy Committee emphasised that the timing of the UK election on 4 July did not influence the rate decision, which some members considered "finely balanced." On the inflation front, the Consumer Price Index (CPI) met the 2% annual inflation target in May for the first time in nearly three years.
However, services inflation, a key indicator for the central bank, exceeded expectations. Services CPI inflation was 5.7% in May, down from 6.
0% in March but still higher than projected in the May report. Conversely, core goods price inflation was weaker than anticipated. Some members cautioned that the return to 2% CPI was not.
