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August 03, 2023BANK OF ENGLAND MONETARY POLICY The Monetary Policy Committee (MPC) of the Bank of England voted to increase the Bank Rate by 0.25 percentage points to 5.25%.
Global economic activity is expected to be slightly stronger in Q2 2023 than expected in the May Monetary Policy Report. Inflation rates are falling in US and euro area but core inflation remains elevated.
According to the revised first quarterly estimates, real Gross Domestic Product (seasonally adjusted annualized rate) grew 0.6% in the first quarter of 2023. The Bank of England's latest staff projections for real GDP is to have grown by 0.1% (non-annualized) in the second quarter, reduced by public services strikes and the additional bank holiday in May. Economic activity is expected to pick up in the third quarter reflecting a bounce back from the bank holiday in May. The Bank projects UK GDP to increase 0.5% in 2023 and 2024 according to the latest estimates in the August Monetary Policy Report.
The Labour Force Survey (LFS) unemployment rate increased to 4.0% in the three months to May 2023. The UK unemployment rate has been rising because labour force increases are outpacing growth in employment. The rise in employment and faster-than-expected average earnings growth have accelerated household income growth.
CPI inflation was 7.9% in June 2023, down from the 11.1% peak in October 2022, and in line with the projections in the May Monetary Policy Report. The decline was mostly driven by lower fuel prices and stable electricity and gas bills. The Bank expects CPI inflation to average 5.0% in 2023 before slowing to 2.5% in 2024.
The MPC will continue to monitor for persistent inflationary pressures, including tightness of labour market conditions, behaviour of wage growth and services inflation. The Bank notes that further tightening in monetary policy would be required should the economy feel more persistent inflationary pressures.
The next scheduled monetary policy meeting will be on September 21, 2023. An updated Monetary Policy Report is expected to be published on November 2, 2023.
Source: Bank of England, Monetary Policy Summary, Monetary Policy Report - August 2023
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