Bank Rate Maintained At 4.75% - December 2024

20th December 2024

The Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. The MPC adopts a medium-term and forward-looking approach to determine the monetary stance required to achieve the inflation target sustainably.

At its meeting ending on 18 December 2024, the MPC voted by a majority of 6-3 to maintain Bank Rate at 4.75%. Three members preferred to reduce Bank Rate by 0.25 percentage points, to 4.5%.

Since the MPC's previous meeting, twelve-month CPI inflation has increased to 2.6% in November from 1.7% in September. This was slightly higher than previous expectations, owing in large part to stronger inflation in core goods and food. Services consumer price inflation has remained elevated. Headline CPI inflation is expected to continue to rise slightly in the near term. Although household inflation expectations have largely normalised, some indicators have increased recently.

Most indicators of UK near-term activity have declined. Bank staff expect GDP growth to have been weaker at the end of the year than projected in the November Monetary Policy Report. The Committee now judges that the labour market is broadly in balance. Annual private sector regular average weekly earnings growth picked up quite sharply in the three months to October, but has tended to be more volatile than other wage indicators. The latest Agents' intelligence suggests that average pay settlements in 2025 will be within a range of 3 to 4%. There remains significant uncertainty around developments in the labour market.

Monetary policy has been guided by the need to squeeze remaining inflationary pressures out of the economy to achieve the 2% target both in a timely manner and on a lasting basis. Over recent quarters there has been progress in disinflation, particularly as previous external shocks have abated, although remaining domestic inflationary pressures are resolving more slowly.

The Committee continues to consider a range of cases for how the past global shocks that drove up inflation may unwind, and therefore how persistent domestic inflationary pressures may be. The MPC is also monitoring the impact on growth and inflationary pressures from the measures announced in the Autumn Budget, and from geopolitical tensions and trade policy uncertainty. These developments have generated additional uncertainties around the economic outlook.

At this meeting, the Committee voted to maintain Bank Rate at 4.75%.

The Committee continues to monitor closely the risks of inflation persistence and will assess the extent to which the evolving evidence is consistent with more constrained supply, which could sustain inflationary pressures, or with weaker demand, which could lead to the emergence of spare capacity in the economy and push down inflation. A gradual approach to removing monetary policy restraint remains appropriate. Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further. The Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.

The next announcement is on 6 February 2025