Bank of England Cuts Interest Rates as British Economy Weakens

The Bank of England has announced a cut in interest rates for the third time in roughly six months, responding to signs of weakening economic growth in the UK.

On Thursday, the central bank reduced its key interest rate by a quarter point, bringing it down to 4.5 percent. This decision came as the bank adjusted its growth forecasts for the year, indicating a slowdown that was more severe than anticipated.

Details of the Rate Cut

The move was supported by policymakers concerned about the current economic landscape. Two members of the nine-person rate-setting committee even recommended a more significant cut of half a point. The governor of the Bank of England, Andrew Bailey, stated that officials would adopt a “gradual and careful approach” to any future reductions as they continue to monitor both domestic and international economic developments.

Inflation Trends

In December, the inflation rate saw a minor decrease to 2.5 percent, contrary to expectations that it would remain unchanged. Notably, inflation in the services sector also eased, dropping from 5 percent in November to 4.4 percent.

Concerns Ahead

Although inflation has significantly cooled since reaching double-digit levels a couple of years ago, the Bank of England is still cautious about easing monetary policy further. Compared to other nations, like the United States, Canada, and the Eurozone, the UK has been slow in reducing rates. Policymakers are wary of persistent inflation risks, especially since wage growth continues to show strength. Additionally, there are uncertainties related to the new spending and tax policies implemented by the government.

Bank, Economy, Rates