UK keeps base rate at 4%…"Possible to cut if inflation slowdown becomes more evident"

On the 6th (local time), the Bank of England (BOE) held a Monetary Policy Committee (MPC) meeting and left the base rate unchanged at 4.00%.

The BOE cut rates five times from August last year to August this year, but at the previous September MPC it decided to hold the base rate. The 4.00% base rate is the lowest since February 2023.

At this MPC, five members including BOE Governor Andrew Bailey reportedly voted to hold at 4.00%, while four voted to cut by 0.25 percentage points to 3.75%.

Last week Reuters, in a survey of economic experts, had forecast a 6-3 vote to hold.

At the August MPC, which last decided to cut rates, it unusually held a revote and eventually cut rates by a 5-4 vote.

Governor Bailey said in a statement that they balanced "the risk that inflation remaining above target could persist against the risk that weakening economic demand could push inflation too low," and "if inflation is on a normal trajectory, gradual further cuts may be possible."

The UK consumer price index (CPI) inflation rate for September this year was 3.8% year-on-year, lower than the forecast 4.0% but above the BOE's 2% target and the highest among the G7 countries.

The UK's base rate is similar to the US (3.75∼4.00%) but about twice that of the eurozone (deposit rate 2.00%).

In its statement the BOE said, "We judge that the CPI inflation rate has peaked. It is likely that interest rates will continue on a gradual downward path," signaling the possibility of further cuts.

This time the BOE published individual projections of each MPC member for the first time; Governor Bailey, who voted to hold, said, "The risks around medium-term inflation have recently become more balanced," and "if the slowdown in inflation becomes more pronounced, there is a possibility that rates will be cut."

Lee Bo-bae, contributing reporter, Hankyung.com newsinfo@hankyung.com