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March 17, 2022BANK OF ENGLAND MONETARY POLICY The Bank of England Monetary Policy Committee (MPC) voted by 8-1 to increase the Bank Rate by 0.25 percentage points to 0.75%. The minority in the vote preferred to maintain the Bank Rate to 0.50%. Based on its current assessment of the economic situation, the MPC noted that some further modest tightening in monetary policy may be appropriate in the coming months. However, how medium term inflation projections shape might create both upward and downward risks for upcoming monetary policy decisions.
The MPC noted that the invasion of Ukraine by Russia has led to large increases in energy and other commodity prices. The MPC expects global inflationary pressures to strengthen considerably over coming months and economic growth in net energy importer countries such as the United Kingdom to slow.
UK GDP increased 0.8% in January, stronger than expected at the time of the February Monetary Policy Report reflecting improved business confidence and robust labour market activity. GDP growth in January had been broad based across the service, manufacturing and construction sectors. Consumer confidence has declined in response to the squeeze on real household disposable income.
CPI inflation increased from 5.4% in December to 5.5% in January 2022. Inflation is expected to increase to around 8.0% in the second quarter of 2022 with the potential to rise higher later in the year. The overshooting of inflation relative to the 2% target is noted as being primarily due to global energy and goods prices. Inflation is expected to fall back over the medium term as energy prices stop increasing and lower real income puts a downward pressure on domestically generated inflation.
Source: Bank of England, Monetary Policy Summary
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