Bank of England cuts interest rates to 4%. But the decision was not unanimous
The decision was taken in order to stimulate the UK's weak economic growth
2' min read
2' min read
LONDON - The Bank of England met economists' forecasts and cut interest rates for the fifth time in a year, from 4.25 per cent to 4 per cent.
The decision of the Monetary Policy Committee (MPC), however, was not unanimous, a sign of the differences of opinion within it on how to strike the right balance between the need to revive an asphyxiated economy and the duty to keep inflation under control.
Five of the nine members of the MPC, including Governor Andrew Bailey, voted in favour of the quarter-point cut, while the other four wanted to leave rates unchanged. The divisions within the committee were such that for the first time in the history of the Bank of England it was necessary to hold two votes to reach the necessary majority. In the first vote, in fact, one of the members had voted for a half-point cut, while the others were divided four to four.
The UK economy unexpectedly contracted by 0.1 per cent in May, while the unemployment rate rose from 4.4 per cent to 4.7 per cent in the quarter between March and May, according to the latest figures from the Office for National Statistics.
Inflation rose to 3.6 per cent in June, above expectations, and the Bank today revised its forecast upwards to 4 per cent for September, which would bring inflation to double the BoE's target rate of 2 per cent. According to the BoE, inflation will not return to 2% until mid-2027. Of particular concern is the increase in average wages (+5% between March and May).
