Bank of England cuts rates in close decision

Close call on rate cut...

As expected, the Bank of England today lowered its key interest rate (“Bank Rate”) by 25 basis points to 4.00%. The Bank is thus continuing its cautious course of loosening monetary policy restraint; since August 2024, it has reduced key interest rates at every other meeting by a total of 1.25 percentage points. For the 31st time in a row, the decision was not unanimous and was even unexpectedly close: four of the nine members of the Monetary Policy Committee (MPC) voted for unchanged interest rates, and Alan Taylor initially argued for a larger rate cut of 50 basis points. This meant that, unusually, a second vote was necessary. In the second vote, Taylor then voted for a 25 basis point cut, which secured the necessary majority. Andrew Bailey, Governor of the BoE, admitted that today's decision was "finely balanced".

Inflation data have recently been somewhat less favorable. However, the central bank believes that the disinflationary trend in underlying price pressures has continued. The central bank therefore appears to be focusing on the deterioration in the labor market, which will reduce inflationary pressure in the medium term.

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