The
minutes of the meeting showed that the majority were concerned
about the path for inflation, which remains stubbornly high.
Figures on Wednesday showed inflation held steady at 3.8% in the
year to August, double the bank's 2% target.
“Although we expect inflation to return to our 2% target, we’re
not out of the woods yet, so any future cuts will need to be
made gradually and carefully," Governor Andrew Bailey said.
All eyes now turn to the next rate-setting meeting in November.
If the bank carries on cutting interest rates once every three
months, as it has since August 2024, then it will make a further
cut at the next policy meeting in November. It last reduced
interest rates in August.
The bank has been cutting interest rates at a gradual pace
following the unwinding of the previous spike in inflation in
the wake of Russia’s invasion of Ukraine.
However, economists remain split as to whether another cut will
be forthcoming since inflation has proven to be stickier than
anticipated, partly because of relatively high wage increases.
It's a difficult balancing act for the bank as the wider economy
could do with further interest rate reductions given growth
remains fairly tepid.
Some economists think that ongoing inflation concerns and
uncertainty over the government's upcoming budget will mean
there won't be a reduction in November.
The Labour government, which is languishing in opinion polls
despite winning a landslide election victory last year, needs
the economy to start picking up steam. It will be hoping that
further interest rate reductions will be delivered in the coming
year to bolster growth and ease the cost of living by reducing
mortgage rates.
However, Treasury chief Rachel Reeves is widely expected to
increase taxes again in the budget, which will be another
headwind for the British economy.
“Rate-setters will likely want to assess the impact of any
measures announced in the budget before loosening policy again,
leaving December as the earliest point at which they may
consider cutting rates,” said Suren Thiru, economics director at
the accounting institute ICAEW.
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