Highlights
Compared with the August edition, the BoE's new Monetary Policy Report (MPR) shows both higher inflation and lower growth. The mixed picture helps to explain why there was another split vote on the MPC which might well have mirrored September's tight 5-4 outcome but for a change in personnel.
On the basis of market prices which see Bank Rate having peaked and sliding gradually to 4.2 percent by the end of 2026, expected year-end inflation has been revised up to 3.1 percent in 2024 (was 2.8 percent) and 1.9 percent (1.6 percent) in 2025. The new 2026 call is 1.5 percent and so well below the 2 percent target. At the same time, GDP growth is put 0.0 percent (0.1 percent) next year and 0.4 percent (0.5 percent) in 2025. The 2026 forecast is 1.1 percent. More immediately, the bank now expects third quarter GDP to have been unchanged (data due next week), down from its previous 0.1 percent estimate and acknowledges that some indicators point to a contraction. The bank also noted considerable uncertainty about the near-term path of pay although it believes that the labour market has started to loosen.
Taken at face value, the new forecasts suggest that Bank Rate will have to fall more quickly than markets assume if inflation is not to stabilise well below its target over the medium-term. However, private investors have had little faith in the MPR's forecasts for some time and the November update is unlikely be viewed any differently.
On the basis of market prices which see Bank Rate having peaked and sliding gradually to 4.2 percent by the end of 2026, expected year-end inflation has been revised up to 3.1 percent in 2024 (was 2.8 percent) and 1.9 percent (1.6 percent) in 2025. The new 2026 call is 1.5 percent and so well below the 2 percent target. At the same time, GDP growth is put 0.0 percent (0.1 percent) next year and 0.4 percent (0.5 percent) in 2025. The 2026 forecast is 1.1 percent. More immediately, the bank now expects third quarter GDP to have been unchanged (data due next week), down from its previous 0.1 percent estimate and acknowledges that some indicators point to a contraction. The bank also noted considerable uncertainty about the near-term path of pay although it believes that the labour market has started to loosen.
Taken at face value, the new forecasts suggest that Bank Rate will have to fall more quickly than markets assume if inflation is not to stabilise well below its target over the medium-term. However, private investors have had little faith in the MPR's forecasts for some time and the November update is unlikely be viewed any differently.
Definition
Formerly called the Quarterly Inflation Report, the Monetary Policy Report (MPR) is produced by the Bank of England (BoE) every February, May, August and November. The publication updates the central bank's assessment of recent economic developments at home and abroad and sets out the latest official forecasts for growth and inflation. As such, it provides the economic underpinnings for any change in monetary policy made by the Bank's Monetary Policy Committee (MPC). The MPR is released at the same time as the BoE makes its policy announcement
Description
For analysts who want to know the Monetary Policy Committee's latest thinking on the economy, the MPR provides an in-depth guide. As such it offers key information on economic trends and, in particular, areas where the Bank is primarily focused. The MPR is discussed at a press conference held by the BoE governor shortly after its release.
