Bank of England lowers its main interest rate by 0.25%, to 5%, its first cut since for over 4 years
In a statement Thursday, the bank said that by a 5-4 margin, its policymaking panel backed a quarter-point reduction in its main interest rate to 5%, from the 16-year high of 5.25%.
It's the latest central bank to cut interest rates following a long stretch of increases. The
Many economists thought that the
Though those concerns remain, certainly among the four opting to keep borrowing rates on hold, the majority on the panel think the hard medicine of higher borrowing costs has worked, with inflation in the
“Inflationary pressures have eased enough that we’ve been able to cut interest rates today,” said Bank Gov.
Bailey's comment suggests that interest rates will not be falling dramatically over coming months, certainly nowhere near the pace that the bank had hiked them in recent years.
Central banks around the world dramatically increased borrowing costs from near zero during the coronavirus pandemic when prices started to shoot up, first as a result of supply chain issues built up during the pandemic and then because of
Though no one is anticipating rates to fall to those previous lows, there are widespread expectations that the bank will cut again in coming months, especially as its forecasts suggest inflation will be below target in the next couple of years, despite a modest increase in the second half of the year.
“But ultimately it is the data that will determine how interest rates evolve from here, with the bank hoping its conviction that underlying inflation pressures are fading will be vindicated,” said
The cut — and the potential of future cuts — are welcome news to millions of mortgage holders, certainly those whose borrowing costs track the bank's headline rate, though it will likely mean that the savings rates offered by banks will be reduced.
“That will be important reassurance to many that have been scarred by the turbulent and volatile periods in the mortgage market over the last couple of years," he said.
Higher interest rates — which cool the economy by making it more expensive to borrow — have helped ease inflation, but they’ve weighed on the British economy, which has barely grown since the pandemic rebound.
Critics of the
It is a charge that’s also been leveled against the
Other central banks, including the
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