The increase in the path for market-implied policy rates since August had been significantly larger in the United Kingdom than in the United States or the euro area. As this feeds through to retail energy prices, it will exacerbate the fall in real incomes for UK households and further increase UK CPI inflation in the near term. Given the expected path of CPI inflation in the coming months, this suggested a potential upside risk to pay growth in the near term. The Government had also announced that a Growth Plan would be set out on 23 September. A significant minority of respondents in the latest survey had not provided an expected pay settlement figure for the next twelve months, with some indicating that they preferred to wait to observe future CPI outturns before deciding. As a result, in coming to its assessment of the outlook and its implications for monetary policy, the Committee was currently putting less weight on the implications of any single set of conditioning assumptions and projections. 28: The LFS unemployment rate had fallen to 3.6% in the three months to July, its lowest level since 1974 and below expectations at the time of the August Report. Those price increases had raised UK inflation and, since the United Kingdom was a net importer of these items, would necessarily weigh on households real incomes. 28: Twelve-month CPI inflation had risen to 9.4% in June, 0.3 percentage points above the May Report projection. The MPC discussed the surprising strength in inactivity, which had continued to be a key component of the tightness in the labour market. In view of these considerations, all members of the Committee judged that an increase in Bank Rate was warranted at this meeting. Within the aggregate, there had been particular weakness in manufacturing output. The depreciation of sterling against the US dollar had accounted for around 60% of this fall. Would you like to give more detail? Given the Energy Price Guarantee, the peak in measured CPI inflation is now likely to be lower than projected in the August Report, at just under 11% in October. Enquiries to The Banks Survey of Economic Forecasters, published in the August Report, had a median expectation for CPI inflation of 2% at the three-year horizon. As a result, in coming to its assessment of the outlook and its implications for monetary policy, the Committee is currently putting less weight on the implications of any single set of conditioning assumptions and projections. Monetary policy will ensure that, as the adjustment to these shocks occurs, CPI inflation will return to the 2% target sustainably in the medium term. Please enter a search term. 27: Regarding the labour market, the Labour Force Survey (LFS) measure of employment growth in the three months to July had slowed to 0.1%, from 0.5% in the three months to June. Play Why do interest rates matter to me? Nothing searched for. The Bank asserted yesterday that it is happy to push the brake on the economy by raising interest rates while the government presses the accelerator by cutting taxes. Underlying private sector regular AWE pay growth was expected to pick up further, to around 6% over the second half of 2022, driven by persistent tightness in the labour market and by higher inflation. 42: Three members preferred a 0.75 percentage point increase in Bank Rate to 2.5% at this meeting. Monetary policy is also acting to ensure that longer-term inflation expectations are anchored at the 2% target. The Committee judged that, over the first twelve months of a sales programme starting in September, a reduction in the stock of purchased gilts held in the APF of around 80 billion was likely to be appropriate. Households might have experienced an increase in the value of their houses over that period, which could dampen the effect on consumer spending. The Bank would launch a new Short Term Repo (STR) facility to help to ensure that short-term market rates remained close to Bank Rate, and to allow the MPC to make future decisions about APF unwind independently of the implications for the supply of reserves. And, if you have savings, you may be paid less interest. 11: The near-term path for market-implied policy rates had picked up sharply across major advanced economies since the MPCs August meeting. In the United States, GDP was expected to grow by 0.2% in the third quarter, marginally lower than had been anticipated in the August Report, following Q2 GDP growth of -0.1%, which had been weaker than expected. The Citi/YouGov indicator of household expectations at the five to ten-year horizon had risen, but the Banks Inflation Attitudes Survey five-year inflation expectations measure had fallen back. 23 September 2021. This outturn had triggered the exchange of letters between the Governor and the Chancellor of the Exchequer that was published alongside these minutes. 30: In 2022 Q4, CPI inflation was expected to rise to just over 13%, about 3 percentage points higher than the expectation at the time of the May Report and more than 2 percentage points higher than at the time of the June MPC meeting. The scale, pace and timing of any further changes in Bank Rate would reflect the Committees assessment of the economic outlook and inflationary pressures. Note to editors Further information about the Monetary Policy Committee (MPC) is available on our Monetary Policy page. In contrast, core CPI inflation, excluding food, beverages and tobacco and energy, had fallen to 5.8%, around percentage point below the expectation at the time of the May Report. Private sector regular pay had risen by 6.0% in the three months to July, stronger than the expectations of 5.5% at the time of the August Report, and bonuses had also surprised to the upside. Since the start of 2022, however, the unemployment rate had remained broadly flat. Market participants expected that central banks in major advanced economies would continue to react strongly to near-term inflationary pressures. 54: The Committee had been briefedat its Augustmeeting on operational changes to the Sterling Monetary Framework that would come into effect alongside the start of a gilt sales programme. There are significant differences between these projections in the latter half of the forecast period. The Energy Price Guarantee, while welcome in its reduction of the near-term peak in inflation, would provide additional support to households, which would add to demand pressure. February MPC Summary and minutes and February Monetary Policy Report. The Bank of England Act 1998 gives the Bank of England operational responsibility for setting monetary policy to meet the Governments inflation target. 48: As set out in the minutes of its May 2022 meeting, the Committee had asked Bank staff to work on a strategy for selling UK government bonds (gilts) held in the Asset Purchase Facility (APF) and had committed to providing an update at its August meeting. Wed also like to use some non-essential cookies (including third-party cookies) to help us improve the site. For 2022, the banks measure of households net income after taxes and inflation is expected to fall by 2 percent from last year, and fall again in 2023. According to contacts of the Banks Agents, growth in manufacturing output had continued to be held back by supply chain disruptions, although to a slightly lesser extent than in recent quarters, but demand had also weakened. 9: Prices of other commodities, including oil and metals, had eased since the August Report, potentially reflecting market participants adjusting downwards their expectations of the global economic outlook. LFS employment growth had been strong, picking up to 0.9% in the three months to May. The Committee would continue to monitor measures of inflation expectations very closely. For more information on how these cookies work please see our Cookie policy. 15: The sterling effective exchange rate had depreciated by around 4% since the previous MPC meeting, and was now around 3% lower compared to the 15-day moving average on which the August Report projections had been conditioned. Faster policy tightening now would help to bring inflation back to the target sustainably in the medium term, and reduce the risks of a more extended and costly tightening cycle later. The Bank of England is expected to raise interest rates by 50 basis points on Thursday, with inflation showing signs of peaking but still uncomfortably high at 10.7% in Market contacts expected that the FOMC would increase the target range for the federal funds rate by at least 75 basis points at its meeting ending on 21 September. Core CPI inflation, excluding food, beverages and tobacco and energy, had risen slightly to 6.3%, also in line with expectations at the time of the August Report. That fall would also, in part, reflect the smaller-than-expected bounce back in growth following the bank holiday in Q2 and the expected impact from the additional bank holiday in September for the Queens state funeral. Inflationary pressures are nevertheless expected to dissipate over time. Bank Rate should be increased by 0.5 percentage points, to 2.25%; The Bank of England should reduce the stock of UK government bond purchases, financed by the issuance of central bank reserves, by 80 billion over the next twelve months, to a total of 758 billion. February MPC Summary and minutes and February Monetary Policy Report. The MPC will take the actions necessary to return inflation to the 2% target sustainably in the medium term, in line with its remit. In the euro area, the unemployment rate had fallen to 6.6% in July, the lowest on record. Balancing these considerations, this member agreed that a further tightening was appropriate at this meeting, but felt that a smaller increase in Bank Rate would help minimise the risks, while retaining the option to act more forcefully if required at future meetings. For these members, a tight labour market with wage growth and domestic inflation well above target-consistent rates justified a further, forceful response from monetary policy. Nothing searched for. For the duration of the Guarantee, this might have been expected to reduce the risk that a long period of externally generated price inflation led to more persistent domestic price and wage pressures, although that risk remained material. The minutes of the Committee meeting ending on 2 November will be published on 3 November 2022. Sterling had depreciated materially over the period. Sterling has depreciated materially over the period. One member (Swati Dhingra) voted against the first proposition, preferring to increase Bank Rate by 0.25 percentage points, to 2%. Nevertheless, the employment rate had remained somewhat below its level immediately prior to the pandemic, with the inactivity rate still somewhat higher than it had been during that earlier period. There had also been some indications of reduced mortgage credit availability, primarily reflecting a response to the worsening economic outlook rather than a reduction in lenders risk appetite. 10: Since the MPCs previous meeting, there had been large and volatile movements in financial markets globally, and particularly in the United Kingdom. 19: Monthly GDP had risen by 0.2% in July, weaker than expectations at the time of the August Report, reflecting some modest downside news to underlying growth that was expected to slow in 2022 Q3. UK measures, which had fallen steadily from their recent peaks in March 2022, had troughed in late July and then had been volatile. 59: Consistent with the Committees decision at its February 2022 meeting to begin to reduce the stock of sterling non-financial investment-grade corporate bond purchases by ceasing to reinvest maturing assets and by a programme of corporate bond sales to be completed no earlier than towards the end of 2023 that should unwind fully the stock of corporate bond purchases, the Bank would begin sales of corporate bonds in the week commencing 19 September 2022, with operational details to be published around a month ahead of auctions commencing. 45: Consistent with the guidance set out in the minutes of its August meeting, and given that economic and market conditions were judged appropriate, all members of the Committee agreed at this meeting that the Bank of England should reduce the stock of UK government bond purchases, financed by the issuance of central bank reserves, by an amount of 80 billion over the next twelve months, comprising both maturing gilts and gilt sales, to a total of 758 billion. 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