The Bank of England has cut interest rates to 4%, in line with market expectations.
The Monetary Policy Committee (MPC), which sets monetary policy to meet the 2% inflation target, has voted by a majority of 5 to 4 to reduce Bank Rate by 0.25 percentage points, rather than maintaining it at 4.25%.
Alpesh Paleja, deputy chief economist, CBI, reacted: “While interest rates are now at their lowest in over two years, today’s cut is line with the ‘gradual and careful’ pace of loosening that the Monetary Policy Committee have flagged so far. Gradual, because the MPC is still caught between a rock and a hard place.
“On the one hand, the labour market is cooling and economic growth looks set to be weaker than the Bank expected, strengthening the case for faster rate cuts. On the other, even with wage growth easing, price pressures remain stubborn. Inflation has come in higher than the Bank anticipated, and households’ inflation expectations are still uncomfortably high.
“As the MPC continues to walk this tightrope, rate cuts are likely to remain gradual: we expect two more reductions, with interest rates settling at 3.5% early next year. But if the risks to the inflation outlook shift sharply in either direction, the pace of monetary loosening could look very different.”
