LONDON – The Bank of England on Thursday delivered its first interest rate cut in more than four years, taking the key rate to 5%.
While some analysts have suggested the BOE may announce an interest rate cut during its latest meeting, the lack of a clear signal from the central bank has shrouded the decision in uncertainty.
Policymakers ultimately voted 5-4 to cut it, with Gov. Andrew Bailey saying the committee would move forward cautiously.
The market is pricing in a 61% chance of a 25 basis point reduction from the key rate at the August meeting at 8:15 am in London, even if UK inflation hits the BOE’s 2% target for two consecutive months.
The Bank Rate has been held at a 16-year high of 5.25% since August 2023.
The BOE usually gives less forward-looking guidance than some other central banks, but Thursday’s decision was seen as a very close call, as the new six-week window of communication is limited by the UK general election.
A blurred bus passes the Bank of England in the City of London on February 7, 2024 in London, England.
Mike Kemp In Picture | Getty Images
While the recent breakdowns have seen two votes to reduce rates and seven hold, some of the BOE’s more hawkish policymakers have been vocal about their concerns about wage growth and services close to inflation.
The decision will be announced at noon in the UK and will be followed by a press conference. Thursday will also see the release of the monthly Monetary Policy Report, which will contain forecasts for economic growth and inflation.
