For directors, it is too early to conclude that inflation is on a downward path.
He Bank of England (BoE) decided to maintain interest rates at 5.25%, which represents its third consecutive pause and leaving them at the highest level since 2008 after the Fed decision. The organization, which thus complies with all forecasts, warned that “there is still a way to go” in the fight against inflation.
As the organization detailed in its statement, for the members who considered that in this meeting was justified maintain the bank rate at 5.25%, it was too soon to conclude that service price inflation and wage growth were on a firmly downward path.
“It is likely that the second round effects take time to disappear and, with the labor market still tight, it is unclear to what extent wage and price setting would take into account the downward trajectory of inflation,” he said.
Meanwhile, the three members preferred an increase of 25 basis points justify that an increase was necessary at this meeting to address the risks of more deeply entrenched inflationary persistence and for inflation to reach its target again in a sustainable manner in the medium term.
“Although current indicators of economic activity had remained subdued, real household incomes had continued to rise and forward-looking indicators of output remained positive. The labor market was still relatively tight. Measures of wage growth had moderated slightly, but they remained at rates higher than those compatible with the inflation objective. The underlying inflation of the prices of services had remained high,” he stated.
Inflation would reach the target in 2025
Besides, andl November Monetary Policy Report The MPC includes projections conditional on a market-implied trajectory for the bank rate that remains in the area of 5.25 until the third quarter of 2024 and then gradually decreases to 4.25% at the end of 2026.
In this context, it is expected that The Gross Domestic Product (GDP) remains practically stable in the fourth quarter and in the coming quarters of 2024.
In its most probable projection, inflation returns to the 2% target by the end of 2025 and falls below the target subsequently. “The Committee continues to judge that the risks to its inflation projection were biased upwards, so that the average projection is 2.2% and 1.9% over the two- and three-year horizons,” they concluded.
Source: Ambito
