The base rate was cut to 4% from 4.25% at the MPC’s last meeting in August, following a narrow voting majority of 5:4.
However, following figures released yesterday that showed inflation was 3.8% in the 12 months to August – significantly above the bank’s 2% target – it is unsurprising that there was no cut to the base rate this month.
This month’s decision was made on a 7:2 vote split, and two members voted for a 25-basis-point cut to 3.75%.
Peter Stimson, MPowered Mortgages’ director of mortgages, said yesterday that the latest inflation figures had “cauterised any chance of a September base rate cut.”
At this month’s meeting, the MPC said there had been “substantial disinflation” in the last two-and-a-half years, supported by the committee’s “restrictive stance of monetary policy”.
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It said this progress allowed for the central bank to cut the base rate, adding that the MPC “remains focused on squeezing out any existing or emerging persistent inflationary pressures, to return inflation sustainably to its 2% target in the medium term”.
The MPC minutes said it was “alert” to the risk of inflation, which is expected to rise slightly to around 4% in September, adding that GDP growth had remained “subdued”.
It added: “The timing and pace of future reductions in the restrictiveness of policy will depend on the extent to which underlying disinflationary pressures continue to ease.
“Monetary policy is not on a pre-set path, and the committee will remain responsive to the accumulation of evidence.”
The MPC said it had limited economic data ahead of September’s meeting and, regarding the two members who voted for a cut, said it was noted that disinflation was continuing.
It decided that a “gradual and careful approach to the further withdrawal of monetary policy restraint remained appropriate”, adding that the timing and pace of this would depend on the easing of underlying disinflationary pressures.
