Bank of England cuts rate to 5pc

LONDON: The Bank of England cut interest rates from a 16-year high on Thursday after a narrow vote in favour from policymakers divided over whether inflation pressures had eased sufficiently.

Governor Andrew Bailey -- who led the 5-4 decision to lower rates by a quarter-point to 5.0 per cent -- said the BoE’s Monetary Policy Committee would move cautiously going forward.“We need to make sure make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much,” he said in a statement alongside the decision.

Thursday’s decision was in line with the forecast in a Reuters poll of economists but financial markets had only seen just over a 60 per cent chance of a cut.Rates have been on hold for almost a full year -- the longest period rates have been left unchanged at the peak of a BoE tightening cycle since 2001 -- and this is the first cut in rates since March 2020, at the start of the Covid-19 pandemic.

In June the BoE voted 7-2 to keep rates on hold, and minutes of the most recent meeting showed the decision to cut rates had been “finely balanced” for some members -- echoing the language used previously when rates were kept unchanged.None of the policymakers who changed their vote at this meeting -- Governor Andrew Bailey and Deputy Governors SarahBreeden and Clare Lombardelli -- had spoken publicly about monetary policy since

the BoE’s last meeting in June.Speaking opportunities had been limited by an election campaign which ended on July 4, which brought the Labour Party to power with a large majority.