The Bank of England cut interest rates for the third time in six months, citing weaker-than-expected economic growth and a potential risk of inflation. The central bank reduced its key rate to 4.5 percent, lowering its forecast for this year’s growth to 0.75 percent.
Governor Andrew Bailey warned that the road ahead will have “bumps” due to global uncertainty, including trade war risks. While inflation is expected to rise through most of this year, policymakers believe it will return to the 2 percent target in a few years.
The bank noted a slowdown in inflation, with the services sector slowing to 4.4 percent from 5 percent in November. Policymakers remain cautious about lingering inflationary risks and the impact of recent government spending and tax changes.
A global trade war poses an economic risk, but it’s not expected to have a lasting impact on inflation. The Bank of England downgraded its forecasts for the year, citing weak growth ahead of midyear pick-up.
Despite record-high stock market levels, policymakers are cautious in easing policy due to uncertainty surrounding government spending and tax changes. They will assess evidence at each meeting to determine future rate cuts.
Source: https://www.nytimes.com/2025/02/06/business/bank-england-interest-rates.html