The Monetary Policy Committee (MPC) of the
At its meeting ending on December 14, 2022, the MPC voted by a majority of 6-3 to increase bank rate by 0.5 percentage points, to 3.5 per cent. Two members preferred to maintain bank rate at 3 per cent, and one member preferred to increase bank rate by 0.75 percentage points, to 3.75 per cent.
According to the statement, inflation was expected to fall sharply from mid-2023, to some way below the 2 per cent target in years two and three of the projection. The central bank said this reflected a negative contribution from energy prices, as well as the emergence of an increasing degree of economic slack and a steadily rising unemployment rate. The risks around that declining path for inflation were judged to be to the upside, it added. Domestic wage and price pressures are elevated, the central bank said.
Most indicators of global supply chain bottlenecks have eased, but global inflationary pressures remain elevated. According to the central bank's statement, advanced-economy government bond yields have fallen, particularly at longer maturities. There has been some reduction in UK fixed-term mortgage rates since the Committee's previous meeting, but rates remain materially higher than in the summer, it added.
Bank staff expects UK gross domestic product (GDP) to decline by 0.1 per cent in the fourth quarter (Q4) of 2022, 0.2 percentage points stronger than expected in the November Report. Household consumption remains weak and most housing market indicators have continued to soften. Surveys of investment intentions have also weakened further, according to the statement.
Although labour demand has begun to ease, the statement added the labour market remains tight. The unemployment rate rose slightly to 3.7 per cent in the three months to October and vacancies have fallen back, but the vacancies-to-unemployment ratio remains at a very elevated level, according to the Bank of England statement.
The statement added annual growth of private sector regular pay picked up further in the three months to October, to 6.9 per cent, 0.5 percentage points stronger than the expectation at the time of the November Report.
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