“The MPC opts for a hawkish hold” says Yael Selfin, Chief Economist at KPMG UK.
“The Bank of England has kept interest rates on hold as the MPC continues to monitor whether the current policy stance is sufficient to bring inflation down without the risk of overtightening it in the medium term. While the Bank revised its inflation projection down for this year, there is still some way to go before it could confidently say that price developments are under control.
“Although headline inflation has come below the Bank’s forecast in recent months, pay growth has surprised to the upside. However, uncertainty about the reliability of the official wage data, which is running at higher levels than other comparable survey indicators, complicates the assessment of monetary policy effectiveness on the labour market.
“We expect the next couple of months to bring little change to the overall level of interest rates as inflation continues to gradually descend towards its target. We expect the Bank will look to ease policy towards the latter part of next year, and while the outlook for growth remains historically weak, more immediate risks to inflation are still skewed to the upside.”
