Most economists had already predicted the nine-member Monetary Policy Committee (MPC) would lower the bank’s main interest rate by a quarter of a percentage point to 4.50%, taking it to its lowest level since mid-2023.
The Bank of England has cut interest rates for the third time in six months, lower the base rate from 4.75% to 4.5%.
Most economists had already predicted the nine-member Monetary Policy Committee (MPC) would lower the bank’s main interest rate by a quarter of a percentage point to 4.50%, taking it to its lowest level since mid-2023.
Members of the MPC voted 7-2 for a cut, but the surprise was that two members called for a bigger rate cut of half a percentage point to 4.25%.
The two MPC members – Catherine Mann and Swti Dhingra – expressed their concern about indications that the economy was slowing faster than expected.
At the same time, the pound fell by 1% against the dollar as traders bet on further rate cuts on continuing fears about poor economic growth.
The decision comes despite inflation remaining above its target of 2%.
Official figures earlier this month showed a surprise fall in the inflation rate to 2.5% in the year to December, largely as a result of easing price pressures in the services sector, which accounts for around 80% of the UK economy.