Why the UK MPC should stand pat

The UK MPC should keep policy unchanged because weak broad-money growth points to renewed disinflation in 2027–2028.

• Since the post-war period, turning points in annual non-financial M4 growth have led turning points in core CPI/RPI inflation by a median of 28 months, with leads of 27 months at peaks and 29 months at troughs.
• Annual broad-money growth bottomed in October 2023, implying a core-inflation trough around March 2026; the actual trough came in April at 2.5%, before core inflation rose to 2.8% in September.
• The higher-than-expected inflation low was attributed to cost-push shocks from government policies and Gulf War III offsetting disinflationary pressure from very weak money growth in 2023.
• Money-growth recovery was limited: annual expansion peaked at 4.8% in January 2025, implying a core-inflation peak around April 2027 using the 27-month median lag.
• Broad-money growth then fell to 3.0% in January 2026 and remained weak at 3.4% through August, suggesting downward monetary pressure on inflation in the second half of 2027 and into 2028.

Takeaway: Further tightening could reinforce the forthcoming disinflation, unnecessarily damage the economy and eventually cause inflation to undershoot, so the MPC should stand pat.