UK interest rates latest: Bank of England cuts interest rates to 4.5%, the lowest level since June 2023
An unhappy mix of slow growth and rising prices, the Bank suggests. Kevin Peachey, the cost of living correspondent, notes that the Bank of England expects the sluggish growth to last longer than previously predicted. Additionally, the expectation of rising gas prices is likely to drive inflation, creating an unhappy mix for the chancellor to consider ahead of big spending decisions. The Bank governor indicates they will take a “gradual and careful” approach to further interest rate cuts.
Chancellor Rachel Reeves has welcomed the decision to cut interest rates to 4.5%, stating it will help ease the cost of living pressures for families and make it easier for businesses to borrow or grow. However, she remains unsatisfied with the growth rate and promises to go further and faster to kickstart economic growth, focusing on removing regulatory barriers and investing in infrastructure.
Faisal Islam, the economics editor, highlights that the Bank considered a larger half a percentage point cut in rates due to the UK’s economic stagnation. While a weak economy would typically lead to further gradual cuts, the stagnant economy is now accompanied by sharper inflationary risks from higher energy prices. Inflation is expected to rise sharply into the autumn, driven by increases in gas prices. The Bank is also cautious about the uncertainty surrounding US President Donald Trump’s trade policy, which could impact the UK’s economic outlook.
Tommy Lumby, the BBC business data journalist, explains that interest rates are currently at 4.75% and are expected to be cut to 4.5% at the Bank’s meeting, the lowest since June 2023. This could be one of several cuts this year, but the US trade tariffs could influence the extent of these cuts. Interest rates affect various aspects of the economy, including mortgage holders, first-time buyers, and the government’s debt payments. The Bank must balance the need to control inflation with the risk of damaging the economy.— news from BBC.com
