Responding to the Bank of England’s decision to hold interest rates, Julian Jessop, Economics Fellow at the Institute of Economic Affairs said:

“The Bank of England was right to keep interest rates on hold today. There is huge uncertainty, reflected in the three different scenarios discussed in the accompanying Monetary Policy Report. But the Committee has judged that the upside risks to inflation from higher commodity prices are being offset, at least for now, by the weakness of the labour market and the downside risks to economic growth.

“The Bank now expects CPI inflation to dip from 3.3% in March to 3.0% in April, then rise again to peak at a little over 3.5% in the autumn. That should just about be low enough to keep interest rates on hold, especially with unemployment forecast to pick up again too.
But there is one other factor which deserves more attention. This is that growth in broad money supply is also relatively subdued, especially compared to the surge which fuelled the inflation spike in 2022.

“The Bank’s latest Monetary Policy Report does at least note that the ratio of broad money to nominal GDP has fallen further below its pre-pandemic trend. However, none of the MPC members mention this in their comments.”