Bank of England cuts interest rates, lowers UK growth forecast
The Bank of England has cut interest rates to 4.5%, as it halved its UK growth forecasts for the year and warned households would face renewed pressure from rising prices.
With the government under fire over the sluggish economy, the Bank’s monetary policy committee (MPC) voted by a majority of seven to two to reduce its key base rate, down from 4.75%, to provide some financial relief to borrowers, News.Az reports, citing foreign media.
It also sounded the alarm for the year ahead, downgrading its 2025 growth forecasts made in November from 1.5% to 0.75% and warning that inflation would reach a fresh peak of 3.7% by the autumn – almost twice the 2% target set by the government.
“It will be welcome news to many that we have been able to cut interest rates again today,” said Andrew Bailey, the Bank’s governor. “We’ll be monitoring the UK economy and global developments very closely and taking a gradual and careful approach to reducing rates further.”
Taking borrowing costs to the lowest level since June 2023, the decision came after inflation fell back from a peak of more than 11% in the second half of 2022. Economic activity has slowed almost to stalling point amid a decline in business confidence since the chancellor Rachel Reeves’s October budget.
Financial markets had indicated a 97% probability of a cut in borrowing costs after better-than-expected figures last month showed inflation unexpectedly cooled to 2.5% in December, down from 2.6% in November.
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