Bank of England Cuts Rates to 4.0%

• The Bank of England cut interest rates on Thursday, but four of its nine policymakers - worried about high inflation - sought to keep borrowing costs on hold.
• Difficulty reaching an agreement meant the Monetary Policy Committee had to hold two rate votes for the first time in its history. With the MPC split over how to respond to an inflation rate that the BoE forecasts will soon be double its 2% target and a recent worsening of job losses, Governor Andrew Bailey and four colleagues backed lowering the Bank Rate to 4% from 4.25%
• But that was only after a first round of voting ended in a 4-4-1 split with external MPC member Alan Taylor initially backing a half-point cut. The four members of the MPC who backed keeping rates on hold included Clare Lombardelli, the deputy governor for monetary policy, who broke from the majority for the first time. Chief Economist Huw Pill also voted to keep the Bank Rate at 4.25%.
• The BoE repeated its guidance about "a gradual and careful approach" to further cuts in borrowing costs but added a new line to its message on the outlook, hinting that its run of rate cuts might be nearing an end.
• A halt to the process of cutting rates would be a blow for finance minister Rachel Reeves and Prime Minister Keir Starmer, who have struggled to meet their promise to voters to speed up Britain's slow economic growth. Bailey said the decision to cut rates for the fifth time since August last year was "finely balanced," although he thought they were still on a downward path.

(Source: Reuters)