Bank Of England Cuts Base Rate By 25 Bps To 4.5%

Summary:

Investing.com - The Bank of England reduced interest rates by 25 basis points Thursday, as widely expected, in an attempt to boost...

Investing.com - The Bank of England reduced interest rates by 25 basis points Thursday, as widely expected, in an attempt to boost the country’s sluggish growth in the face of elevated uncertainty.

The U.K. central bank cut its benchmark Bank Rate to 4.25% from 4.50%, with seven members of the Monetary Policy Committee voting for the cut and two seeking no reduction this month.

This cut is the fourth rate reduction from last year’s peak of 5.25%, and the second this year, after the MPC authorised an easing of monetary policy in February.

The announcement was delayed by two minutes in order to accommodate a two-minute silence to commemorate Victory in Europe Day this week.

The U.K. economy grew by just 0.9% in 2024, and at the February BOE policy meeting, the policymakers cut growth forecasts for 2025 by half to just 0.7%.

The National Institute of Economic and Social Research has warned U.K. economic growth is on track to be weaker than previously expected this year, and thus investors will also be paying close attention to the Bank’s forecasts for inflation and economic growth.

Much has changed since the February monetary policy report, including U.S. President Donald Trump’s proposals for global tariffs, embroiling the U.K. and other major trading partners in a trade war.

That said, Trump has just announced a trade deal between the U.S. and Britain would be "full and comprehensive," as the two countries were tipped to soon sign an agreement, which could remove some immediate uncertainty. And U.K. inflation remains elevated.

The latest data shows an inflation rate of 2.6% in the 12 months to March, although a series of bill increases at the start of April - including domestic energy prices - mean the rate is expected to climb.

Inflation is seen reaching 3.7% later this year, according to BOE estimates released in February.

Investors have almost fully priced in three additional rate cuts by the end of the year, which would take the benchmark rate to 3.50%.

Source: Investing

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Bank Of England Cuts Base Rate By 25 Bps To 4.5%

Source: Investing

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