Monetary Policy Statement issued by the Bank of England - February 2025

The Bank of England issued its monetary policy statement at the end of its February meeting, where it decided to cut interest rates by 25 basis points to 4.50%, in line with widely held market expectations. Below are the key points from the monetary policy statement issued by the Monetary Policy Committee of the Bank of England:

• The Monetary Policy Committee aims to achieve an inflation target of 2% while supporting growth and employment.
• The Monetary Policy Committee employs a medium-term and forward-looking approach to determine monetary policy.
• On February 5, 2025, the Monetary Policy Committee voted 7-2 to reduce the bank rate by 0.25 percentage points to 4.5%. Two members preferred a 0.5 percentage point reduction to 4.25%.
• Significant progress has been made in combating inflation over the past two years due to the decline in external shocks and restrictive monetary policy.
• The Monetary Policy Committee has begun to gradually ease policy while keeping the bank rate in restrictive territory to combat inflation.
• The consumer price index inflation rate was 2.5% in the fourth quarter of 2024. It is expected to rise to 3.7% in the third quarter of 2025 due to global energy costs and regulatory price changes, but domestic inflation is expected to decline.
• The consumer price index inflation rate is expected to return to the 2% target later, but the Monetary Policy Committee will monitor persistent inflationary pressures.
• GDP growth has been weaker than expected, with declining confidence among businesses and consumers, but a recovery is expected by mid-year.
• The labor market is beginning to slow and is considered broadly balanced, although productivity growth is weaker than expected.
• The Monetary Policy Committee sees sufficient progress in reducing inflation in domestic prices and wages to lower the bank rate to 4.5%.
• A gradual and cautious approach to further monetary policy easing is deemed appropriate.
• Risks include the potential for continued inflation and uncertainty about supply and demand pathways, which may impact monetary policy decisions.
• The Monetary Policy Committee will monitor inflation risks and economic balances, adjusting monetary policy to ensure a sustainable return of inflation to the 2% target.

To be continued..