The Bank of England has trimmed its benchmark interest rate by 25 basis points to 4.50%, a move largely anticipated by investors despite an expected uptick in inflation over the next year.
The decision, backed by seven members of the Monetary Policy Committee (MPC), faced opposition from Swati Dhingra and Catherine Mann, who advocated for a steeper 50 basis point cut. Many had speculated that at least one member, likely Mann, would hold rates steady.
Governor Andrew Bailey emphasized the Bank’s cautious approach, saying that the central bank will monitor both the UK economy and global factors closely, adopting a gradual strategy in any further rate adjustments.
The split vote indicates heightened apprehension over economic softness, prompting the MPC to prioritize growth concerns over inflationary pressures.
Inflation is expected to surge to 3.7% in the third quarter of this year, up from a previous forecast of 2.8%. This spike is attributed mainly to rising global energy costs since November, along with increases in controlled prices such as water rates and public transit fares. Nonetheless, the committee still believes that budget-induced tax increases will have a minimal impact on consumer prices.
