Bank of England Cuts Interest Rates for the First Time in 4 Years
While the US Federal Reserve kept its interest rates unchanged this time, the Bank of England has announced its first rate cut in four years.
This brings the key rate to 5% after the 0.25% cut. UK policymakers also voted 5-4 in favor of the rate cut.
Key points:
- The Bank of England cuts interest rates from 5.25% to 5%.
- This is the first rate cut in four years.
- The decision was made by a narrow 5-4 vote among policymakers.
- The cut comes after inflation hit the BoE’s 2% target for two consecutive months.
The UK’s inflation was hitting the Bank of England’s target of 2% for two months straight. Markets also were expecting a 61% probability of a 25 basis point interest rate cut.
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Bank of England Kept Interest Rate At a 16-Year High Since 2023
The BOE has maintained a 16-year high interest rate of 5.25% for almost a year since August 2023. BOE governor Andrew Bailey stated the decision to chop the interest rates was “finely balanced.”
Andrew said, “The U.K. economy has been stronger in recent months.” “We need to put the period of high inflation firmly behind us.”
The rate cut has had immediate effects on financial markets. According to CNBC, the British pound fell to a one-month low against the US dollar, trading at $1.2763 shortly after the announcement.
Meanwhile, yields on UK government bonds (gilts) declined, with the 10-year gilt yield dropping 4 basis points to 3.932%.
