As expected, the Bank of England cut its benchmark interest rate today after a year at its highest level in sixteen years.
So, they were cut by twenty-five basis points to five percent, the first cut in four years. At the same time, the Bank of England noted that it will continue to ease monetary policy cautiously until officials are more confident that inflation will remain low.
It is true that it is worth noting that five members of the Bank of England were in favor of lowering interest rates, while four believed that they should not be changed yet. It is expected that six representatives of the Central Bank with the right to vote will approve the reduction.
The decision was billed as "finely balanced" but as noted, the four MPCs decided not to change borrowing costs as progress in subdued UK inflation was hampered by rising service prices and the lingering risk that spillovers could undo the central bank's work.
However, the Committee noted that it expects headline inflation to moderate and inflation expectations to move closer to target. In addition, restrictive monetary policy has slowed GDP growth to below potential, while labor market conditions continue to be good, justifying less restrictive policies.
