Breaking News: Bank of England Cuts Benchmark Interest Rate

By Evans Momodu
1 minute read


The Bank of England has cut interest rates by 0.25 percentage points to 4.5%, lowering borrowing costs amid a sluggish economic outlook. Two members of the Monetary Policy Committee pushed for a deeper cut of 0.5 percentage points, signaling that more reductions could be on the way.

Despite the rate cut, the Bank downgraded its growth forecasts, warning that the UK will narrowly avoid a recession in the coming months. It also slashed its estimate of the economy’s capacity to generate income, reducing its potential growth rate to 0.75% from 1.5% a year ago.

In a further setback for the chancellor, the Bank said last week's growth plan announcement would have no impact on GDP growth within its forecast horizon.

Governor Andrew Bailey emphasized the Bank’s cautious approach, stating, "Low and stable inflation is the foundation of a healthy economy, and it's the Bank of England's job to ensure that."

The Bank’s projections suggest at least two more rate cuts in the coming years to help bring inflation down toward its 2% target, though investors anticipate more. Meanwhile, higher inflation forecasts and weaker economic growth projections paint a grim picture.

While the Bank expects last October's Budget to provide a 0.75% boost to growth through public investment, the National Insurance rise is expected to dampen employment and economic activity.

Additionally, the looming threat of US tariffs under Donald Trump poses further risks, though the Bank has yet to factor them into its economic models.
Source: Sky news