BoE cuts interest rates to 4% after narrow 5-4 vote
The Bank of England (BoE) announced a quarter-point cut in its benchmark interest rate on Thursday, lowering it from 4.25% to 4%, but the decision exposed a sharp split among its policymakers.
For the first time in its history, the Monetary Policy Committee (MPC) held two rounds of voting after the initial vote ended in a rare 4-4-1 deadlock. External MPC member Alan Taylor initially pushed for a half-point cut, contributing to the stalemate, News.Az reports, citing Reuters.
Governor Andrew Bailey and four other members backed reducing borrowing costs amid concerns over a slowing economy and rising job losses. However, four MPC members, including Deputy Governor Clare Lombardelli—breaking from the majority for the first time—and Chief Economist Huw Pill, voted to keep rates unchanged, citing worries about inflation running well above the BoE’s 2% target.
The BoE’s latest forecasts show inflation could peak at 4% in September, higher than its earlier 3.7% estimate, and it expects prices to return to target only by the second quarter of 2027. Inflation has remained above target nearly continuously since mid-2021.
The central bank emphasized a “gradual and careful approach” to future rate cuts but hinted that the cycle of reductions may be nearing its end, dropping its previous language that policy remains restrictive.
The decision to pause the pace of cuts may present a challenge for the government, which has promised to accelerate Britain’s sluggish economic growth. The MPC projects modest economic growth of 0.3% in the current quarter, slightly up from 0.1% in the second quarter.
BoE officials, including Governor Bailey, are set to hold a press conference to discuss the decision.
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