The Bank of England has reduced its basic rate to 4.5 percent – the third such reduction in six months – because policy makers are trying to strengthen the weakening economy of Great -Britain.
In 7-2 votes, the nine-member Monetary Policy Committee chose a decrease of 0.25 percentage point, although two members argued a sharper reduction of 0.5 percentage points. Governor Andrew Bailey called the move ‘Welcome News’ for borrowers, while emphasizing that the bank will continue to find a ‘gradual and careful approach’ for further cuts.
Although inflation is a more moderate 2.5 percent, the Central Bank warned that the head percentage will temporarily rise to around 3.7 percent this summer, partly due to higher energy bills and increased employer national insurance policies that will come into effect in April. Despite that inflation in the short term, the bank’s newest predictions suggest that the VK will return a technical recession and GDP in a positive area in the early 2025.
The rate reduction comes against a background of global economic uncertainty, in particular the expansion of US President Donald Trump of import tariffs for countries such as China, Canada and Mexico. Although the resulting trade stresses worldwide can increase costs, bank officials say that the immediate impact on the British price levels remains “very uncertain”. An important factor that influences the decisions of future speed could be wage growth, some of which policy makers fear that inflation could again foresee if it surpasses productivity.
Financial markets had already priced in the chance of a 0.25 percentage reduction, which pushed the FTSE 100 to a record high above 8,700 points and Sterling pushed lower against the dollar. Homeowners and potential buyers may see the mortgage interest falling after the decision, but contrast the slower pace of the bank with more aggressive movements that are seen during earlier decline. In a sign of greater caution, the bank also revised its British growth stocks for 2025 to 0.75 percent, which warned that escalating trade conflicts, falling consumer confidence and imminent domestic tax increases can all weigh during recovery.