The Bank also considers other measures, external, such as “core inflation” when deciding whether and 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. The measure was 3.5% in November, up from 3.3% in the year to October.
In October, the Bank governor Andrew Bailey said it 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 the policies it contained – including an increase in National Insurance Contributions paid by employers – would lift inflation slightly as businesses passed on their increased costs through higher prices.
Announcing the November rate decision, Mr Bailey said the path for rates would likely be “downward from here” but warned cuts would be gradual.
After the December meeting, he said “a gradual approach to future interest rate cuts remains right”, but added “with the heightened uncertainty in the economy, we can’t commit to when or by how much we will cut rates in the coming year.”
The next interest rate decision will be on Thursday 6 February.
