Bank of England cuts rates for first time in four months
The Bank of England on Thursday cut its key interest rates for the first time in four months, responding to signs that persistently high inflation affecting British consumers and businesses is starting to ease.
Policymakers at the central bank voted 5-4 to reduce the base rate by a quarter of a percentage point to 3.75%, the lowest level since February 2023, News.Az reports, citing AP.
The decision followed the release of Office for National Statistics data showing consumer price inflation slowed to 3.2% in the 12 months through November, down from 3.6% in October and below the Bank of England’s forecast of 3.4%.
The easing inflation gave policymakers room to lower interest rates to support Britain’s stagnant economy. Earlier statistics indicated a weakening labor market, with job vacancies falling and the unemployment rate rising to 5.1%, the highest since January 2021.
Despite the rate cut, the bank’s Monetary Policy Committee was divided, with four members prioritizing the ongoing fight against inflation, which remains above the 2% target.
Inflation in Britain also remains higher than in other regions. In November, the eurozone’s 20 countries reported a 2.1% inflation rate, while the U.S. inflation rate stood at 3.0% in September, the latest available data due to a government shutdown.
Lowering interest rates can help stimulate economic growth by reducing borrowing costs, encouraging consumer spending, and boosting business investment, though it may also risk driving prices higher. Central bankers must carefully balance these effects to prevent inflation from eroding earnings and savings without unnecessarily constraining economic growth.
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