The Bank of England's Monetary Policy Committee voted six to three to maintain the Bank Rate at 5.25% at its February 2024 meeting. In the three-way split, one member called for an immediate reduction to 5.00% and two advocated a further increase to 5.50%.
The committee acknowledged the progress made on goods and energy inflation whilst flagging that services prices had not yet moderated in the manner required to give the majority confidence that the inflation target was durably within reach.
SERVICES INFLATION ABOVE 6% COMPLICATES OUTLOOK
The MPC cited persistent services inflation running above 6% as the central reason for caution. The committee said it needed to see more convincing evidence of easing wage dynamics and falling services inflation before contemplating any reduction in the Bank Rate.
The two members who voted for a hike to 5.50% argued that holding the rate steady might prove insufficient to bring services inflation down in a timely and credible manner, and that the risk of entrenched domestically generated price growth justified additional tightening. In contrast, the lone dissenter in favour of a cut contended that the cumulative weight of restrictive policy was already more than adequate, and that maintaining rates higher for longer risked an unnecessarily sharp deterioration in economic activity and employment.
The six-strong majority took the view that 5.25% remained the most appropriate stance, noting that the full effect of previous increases was still working its way through mortgage markets, business credit, and consumer spending, and that patience was warranted before drawing definitive conclusions about the inflationary trajectory.
SHIFT IN DISSENT
In earlier votes, all dissenters had voted for a hike; the February vote included a member calling for a reduction.