Announcing the November rate decision, the Bank of England governor Andrew Bailey indicated more cuts were to come but said it would be a “gradual fall from here”.
Although the headline CPI figure of 1.7% is below the 2% target, the Bank also considers other measures, external, such as “core inflation” when deciding how to change rates.
Core inflation doesn’t include food or energy prices because they tend to be very volatile, so can be a better indication of longer term trends. It was 3.2% in the year to September, down from 3.6%.
In its latest forecast for the global economy, the International Monetary Fund (IMF) warned that persistent inflation in countries including the UK and US might mean interest rates have to stay “higher for even longer”.
In October, Mr Bailey said the Bank of England could be a “bit more aggressive” at cutting borrowing costs, if inflation remained under control.
However, after the Budget at the end of that month, the Bank predicted that its measures – such as an increase in National Insurance Contributions paid by employers – will lift inflation slightly as businesses pass on their increased costs through higher prices.
At November’s rate cut Mr Bailey cautioned: “We need to make sure inflation stays close to target, so we can’t cut interest rates too quickly or by too much.”
