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2025-09-18 19:11:20
[Bank of England Sends Key Signal: Slowing Tightening Pace] ⑴ The Bank of England decided on Thursday to maintain its key interest rate at 4%, a move approved by a 7-2 vote, consistent with institutional survey results. ⑵ The Bank of England also announced a slowdown in the pace of quantitative tightening (QT), reducing the annual sales of UK government bonds from £100 billion to £70 billion. ⑶ This decision, also approved by a 7-2 vote, was close to institutional forecasts of £67.5 billion. ⑷ Bank of England Governor Andrew Bailey stated that the move was intended to minimize the impact on bond markets while continuing to reduce the size of the balance sheet, especially after long-term UK government bond yields recently hit a new high since 1998. ⑸ The Bank of England maintained its forecast that inflation will peak at 4% this month and expects it to slowly return to its 2% target by the second quarter of 2027. It also raised its third-quarter economic growth forecast to 0.4%. ⑹ Bailey emphasized that despite the expected decline in inflation, any future interest rate cuts will need to be gradual and cautious. ⑺ It is worth noting that there are differences within the Monetary Policy Committee: Chief Economist Hugh Peel believes that the tightening pace should be maintained at 100 billion pounds, while another member, Catherine Mann, advocates accelerating it to 62 billion pounds. ⑻ Two members of the Monetary Policy Committee, Swati Dhingra and Alan Taylor, continue to vote in favor of cutting interest rates.
