The Bank of England made a historic move by reducing its key interest rate for the first time in over four years, aligning with a global trend of central banks adjusting borrowing costs amidst cooling inflation. This decision now leaves the Federal Reserve among a diminishing group of central banks that have yet to implement rate cuts in response to economic shifts.
On Thursday, the U.K. central bank announced a quarter-percentage point reduction in its benchmark lending rate to 5%. This adjustment comes after maintaining rates at their highest levels since 2008 for the past year, impacting lending activity and imposing strains on the U.K.’s heavily indebted government.
Prior to the decision, investors held differing views on whether the central bank would opt for an immediate cut or await additional indications of declining inflation.
In a divided stance, five policymakers favored the quarter-point rate decrease, while four advocated for keeping rates unchanged, expressing skepticism about the adequacy of inflation containment measures in the U.K.
