This decision came amidst Governor Andrew Bailey’s assertion that considerable effort is still needed to bring inflation down to the standard 2% target. The Monetary Policy Committee (MPC) voted six to three in favour of this decision, indicating a continued cautious approach towards monetary policy.

Highlighting the contrast with the US Federal Reserve’s recent inclination towards interest rate cuts, the BoE’s move led to a notable rise in Sterling, which climbed 0.7% against the dollar. This development underscores the differing economic strategies between the UK and the US in the current financial climate.

The BoE’s stance reflects a heightened awareness of inflationary pressures, with the MPC emphasising the need for potentially more stringent monetary policies should persistent inflationary trends emerge. This perspective aligns with the bank’s revised economic forecasts, which predict a flat growth in the UK’s gross domestic product for the fourth quarter, a slight downgrade from the 0.1% growth anticipated in November.

Governor Bailey highlighted the progress made in managing inflation, which has decreased from over 10% in January to 4.6% in October, but noted that there is still “some way to go”.