A passageway near the Bank of England (BOE) in the City of London, U.K., on Thursday, March 18, 2021.
Hollie Adams | Bloomberg | Getty Images
LONDON — The Bank of England held interest rates steady at 5.25% on Thursday, with the announcement detailing the very divided opinions among board members.
The Monetary Policy Committee voted 6-3 in favor of holding rates, with two dissenters favoring a further 25 basis point hike and one voting for a quarter-point cut. This marked the first meeting since August 2008 that MPC members have voted to move interest rates in opposite directions at the same meeting.
“The MPC remains prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably,” the Bank said in statement.
“It will therefore continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including a range of measures of the underlying tightness of labour market conditions, wage growth and services price inflation. On that basis, the Committee will keep under review for how long Bank Rate should be maintained at its current level.”
Much of the market focus of late has been on when the central bank will start cutting interest rates from their current 15-year high.
U.K. headline inflation unexpectedly nudged upward to an annual 4% in December on the back of a rise in alcohol and tobacco prices, while the closely watched core CPI figure was unchanged at 5.1%.
However, it has remained on a general downward trajectory, while the Bank’s key indicators of the labor market, wage growth and services inflation have all shown signs of easing.
The MPC notably dropped its prior warning that “further tightening” would be necessary if indications emerged of more persistent inflationary pressures, but stopped short of openly signaling that rate cuts were coming into view.
Inflation is projected to fall temporarily to the Bank’s 2% target in the second quarter of this year before rising again in the third and fourth, due to the varying contribution of energy prices to annual comparisons.
Headline inflation is not expected to return to target again until late 2026, the Bank’s newest Monetary Policy Report projected.
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