london skyline

United Kingdom Monetary Policy June 2023

United Kingdom: BoE hikes by 50 basis points in June

On 22 June, the Bank of England (BoE) increased the bank rate from 4.50% to 5.00%, taking total tightening in the current cycle to 490 basis points.

The main driver of the decision was the desire to tame stubborn price pressures: Headline inflation has been above both the market’s and the Bank’s expectations in recent months, and core inflation rose to a multi-decade high in May. In addition, the BoE commented that both employment and wage growth have overshot its forecasts recently, further increasing the pressure to hike.

In its communiqué, the MPC reiterated that further monetary tightening would be required if there was evidence of more persistent inflationary pressures. The Consensus is for the Bank Rate to end the year above its current level, as the BoE continues its efforts to dampen prices.

On the outlook, analysts at the ING said:

“Until we begin to see some improvement in the official inflation statistics, the committee won’t be content with pausing. We’re tempted to say that today’s 50bp move won’t become a new trend, but two further 25bp hikes seem like the most likely route after today’s meeting.”

Goldman Sachs analysts are even more hawkish:

“Given our expectations for resilient growth, sticky wage growth, and stubbornly high core inflation, we expect a second 50bp in August (vs 25bp before) and look for the MPC to finish with a final 25bp hike in September, raising our forecast for the terminal rate to 5.75%.”

The next monetary policy decision will be announced on the 3 August.

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest