By David Milliken and Suban Abdulla
LONDON, Dec 19 (Reuters) – The Bank of England left its main interest rate unchanged at 4.75% on Thursday, but policymakers were more divided over whether rate cuts were necessary to cope with a slowing economy. deceleration.
Three of the nine members of the Bank of England’s Monetary Policy Committee (deputy governor Dave Ramsden and external members Swati Dhingra and Alan Taylor) voted in favor of a quarter-point rate cut to 4.5%.
Economists polled by Reuters expected only one MPC member to vote in favor of a cut.
But Bank of England Governor Andrew Bailey said the central bank needed to stick to its current “gradual approach” to cutting rates.
“With growing uncertainty in the economy, we cannot commit to when or by how much we will cut rates next year,” he said.
Economists polled by Reuters last week predicted the Bank of England would cut rates four times next year, but financial markets have slashed their expectations sharply in response to faster-than-expected wage growth and only see up to two cuts.
The Bank of England has been less willing to cut rates than the U.S. Federal Reserve or the European Central Bank, cutting them by just half a percentage point this year.
Official figures on Wednesday showed that consumer price inflation in Britain rose to 2.6% in November, the highest in the Group of Seven rich economies by a small margin, and slightly higher than the Bank itself of England had predicted last month.
“Headline inflation is expected to continue to rise slightly in the short term,” the Bank of England said.
However, the central bank also cut its growth forecast for the final quarter of this year to zero from a forecast of 0.3% just six weeks ago.
The British economy contracted in September and October – the first consecutive monthly falls in output since 2020 – according to official data last week and business confidence has fallen since Finance Minister Rachel Reeves announced a 25% tax increase. billion pounds for employers in their October. 30 budget.
MPC members who backed keeping rates on hold said it remained “particularly uncertain” whether these higher costs would be passed on to consumers through higher prices or lead to job losses and slower wage growth.
“Recent developments have added to the argument for a gradual approach to the withdrawal of restrictive policies, while avoiding any commitment to change the policy at a specific meeting,” they said.
The three MPC members who voted in favor of cutting rates said a “very restrictive” policy stance risked pushing inflation too far below its 2% target in the medium term and creating an unduly large amount of capacity. surplus in the economy.