Bank of England hikes rates by quarter percentage point in split vote

Bank of England hikes rates by quarter percentage point in split vote

People walk outside the Bank of England in the City of London financial district, in London, Britain, January 26, 2023.

Henry Nicholls | Reuters

LONDON — The Bank of England on Thursday raised its main interest rate by 25 basis points to 5.25%, a 14th consecutive hike as policymakers strive to rein in inflation.

The Monetary Policy Committee (MPC) voted 6-3 in favor of the quarter-point hike, with two members preferring a second straight 50 basis point increase and one voting to keep rates unchanged.

Market pricing was split roughly 60/40 in favor of a quarter-point hike as of Thursday morning, according to Refinitiv data.

During its last meeting in June, the Bank’s Monetary Policy Committee surprised markets with a 50 basis point hike, as inflation in the U.K. was running significantly hotter than across other advanced economies and well above the British central bank’s 2% target.

Prices have since shown signs of cooling, but the MPC is navigating a more complicated picture in the labor market.

Headline consumer price inflation slid to 7.9% in June from a hotter-than-expected 8.7% in May, while core inflation — which excludes volatile energy, food, alcohol and tobacco prices — stayed sticky at an annualized 6.9%, but retreated from the 31-year high of 7.1% of May.

The central bank has been keeping a close eye on the country’s exceptionally tight labor market, but the latest data showed jobs activity softened considerably in May. Wage growth nevertheless remained uncomfortably strong for the Bank, with private sector regular pay growth rising to 7.7% in May.

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