Rate-setters agree ‘cautious’, ‘patient’ policy approach still needed

“In the members’ unanimous view, a cautious and patient approach to monetary policy was still necessary. Decision makers underlined that tight monetary policy continued to be key to maintaining financial market stability and to achieving the inflation target in a sustainable manner,” according to the minutes of the meeting on August 27.

“However, several members indicated that after the temporary discontinuation of interest rate cuts, there might be scope for cautiously lowering interest rates further in the coming period,” the minutes show.

The Council weighed two options at the meeting: leaving the base rate on hold and cutting it by 25bp. The vote to keep the base rate at 6.75pc was unanimous. The decision followed a 25bp cut at the policy meeting in July.

“Decision makers established that there were several strong arguments in favour of both options; however, leaving the base rate unchanged was a better fit to a stability-oriented approach to monetary policy in the current economic environment,” according to the minutes.

“The Council was in agreement that there had been no change in the most important cornerstones of tight monetary policy,” the minutes show, while “several members emphasised that interest rate cuts by the world’s leading central banks might create scope in emerging markets for easing monetary conditions in the coming period”.