Bank of England cuts rates but sees higher inflation after Reeves's budget
The Bank of England cut interest rates on Thursday for only the second time since 2020 and said future reductions were likely to be gradual as it predicted the British government's first budget would lead to higher inflation and economic growth, News.Az reports citing Investing .
The Monetary Policy Committee voted 8-1 to cut rates to 4.75% from 5%. Analysts polled by Reuters had expected a 7-2 vote. Only Catherine Mann favoured keeping rates on hold.
Sterling rose by two-thirds of a cent against the U.S. dollar but investors kept their expectations for rate cuts in 2025 largely unchanged.
BoE Governor Andrew Bailey said "we can't cut interest rates too quickly or by too much" but added: "If the economy evolves as we expect it's likely that interest rates will continue to fall gradually from here."
Bailey told reporters the BoE might cut rates faster if inflation continued to undershoot the central bank's forecasts.
The BoE began cutting borrowing costs in August after seeing signs inflation pressures were easing, but stressed it was moving cautiously. In September it kept rates on hold.
Last week's budget, with its heavy borrowing and spending, prompted investors to dial back their bets on the pace of further rate cuts. Bailey said he did not think that path would be "particularly different" due to the budget.
The BoE said the government's plans were likely to add almost half a percentage point to inflation at its peak in just over two years' time and cause it to take a year longer to return sustainably to the central bank's 2% target.
The Monetary Policy Committee voted 8-1 to cut rates to 4.75% from 5%. Analysts polled by Reuters had expected a 7-2 vote. Only Catherine Mann favoured keeping rates on hold.
Sterling rose by two-thirds of a cent against the U.S. dollar but investors kept their expectations for rate cuts in 2025 largely unchanged.
BoE Governor Andrew Bailey said "we can't cut interest rates too quickly or by too much" but added: "If the economy evolves as we expect it's likely that interest rates will continue to fall gradually from here."
Bailey told reporters the BoE might cut rates faster if inflation continued to undershoot the central bank's forecasts.
The BoE began cutting borrowing costs in August after seeing signs inflation pressures were easing, but stressed it was moving cautiously. In September it kept rates on hold.
Last week's budget, with its heavy borrowing and spending, prompted investors to dial back their bets on the pace of further rate cuts. Bailey said he did not think that path would be "particularly different" due to the budget.
The BoE said the government's plans were likely to add almost half a percentage point to inflation at its peak in just over two years' time and cause it to take a year longer to return sustainably to the central bank's 2% target.
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