The MPC also unanimously agreed to reduce the stock of UK government bond purchases held for monetary policy purposes by £100 billion (~$132.55 billion) over the next 12 months. This will bring the total to £558 billion, financed by the issuance of central bank reserves, the MPC said in a statement.

The decision comes as part of the MPC’s ongoing efforts to return Consumer Price Index (CPI) inflation to its 2 per cent target. August’s CPI inflation stood at 2.2 per cent, but it is expected to rise to around 2.5 per cent by the year’s end, as previous declines in energy prices fall out of annual comparisons. Persistent inflation, particularly in the services sector, remains a concern, with services inflation still elevated at 5.6 per cent.

The Committee has considered various potential economic scenarios. In one case, global inflationary pressures are expected to unwind, potentially easing domestic wage and price dynamics. However, in another scenario, a more restrictive monetary stance may be required if economic slack persists and inflationary pressures continue. In the third scenario, structural shifts, including supply shocks, may necessitate tighter monetary policy for a longer period.

While global growth has remained steady, uncertainty clouds the near-term outlook, with oil prices falling due to weaker demand. Nonetheless, UK economic indicators have shown limited deviation from the Committee’s expectations, with GDP growth projected to stabilise at 0.3 per cent per quarter in the latter half of 2024.

Looking ahead, the MPC has indicated that monetary policy will need to remain restrictive for a sustained period to ensure inflation returns to its target. The Committee remains vigilant in monitoring inflationary risks and will adjust policy as necessary to achieve long-term price stability.

Fibre2Fashion News Desk (KD)