BoE reduced the Bank Rate by 25bps to 4.75%, in line with expectations. The Monetary Policy Committee made the decision by an 8-1 vote, with Catherine Mann dissenting, preferring to keep rates steady. In its statement, BoE highlighted that a “gradual approach” to reducing policy restraint remains “appropriate,” stressing that restrictive monetary policy will need to persist “for sufficiently long” until risks to sustainable 2% inflation are more fully mitigated.
BoE’s revised economic projections reflect a significant adjustment in inflation expectations. The forecast for CPI in Q4 2025 was raised from 2.2% to 2.7%, while the Q4 2026 estimate increased from 1.6% to 2.2%. Longer-term, inflation is expected to ease to 1.8% by Q4 2027, suggesting a slower return to the target rate.
GDP growth estimates were also adjusted, with the Q4 2025 growth forecast increased from 0.9% to 1.7%, though growth for Q4 2026 was revised down to 1.1%, followed by a modest recovery to 1.4% in Q4 2027.
BoE also provided an initial assessment of the government’s Autumn Budget 2024, forecasting that the fiscal measures could boost GDP by approximately 0.75% at their peak, compared to the August projections.
The budget’s influence on CPI inflation is anticipated to peak at just under 0.5%, due to both the narrowing excess supply margin and direct inflationary impacts from the budget measures.
