WORLD: BANK OF ENGLAND CUT ITS KEY INTEREST RATE AS INFLATION SLOWS

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Agency Report

Following a three-year low in UK inflation, the Bank of England said on Thursday that it was further reducing its main interest rate.

At a normal policy meeting, the BoE cut borrowing prices by 25 basis points to 4.75 percent, as was generally anticipated. This was the second cut since August. Later in the day, the US Federal Reserve is expected to lower interest rates.

“We have been able to cut interest rates again” after UK annual inflation fell below the BoE’s target, the central bank’s governor Andrew Bailey said in a statement.

The Consumer Prices Index in Britain stands at 1.7 percent, the lowest level since 2021 and below the two-percent target.

“We need to make sure inflation stays close to target, so we can’t cut interest rates too quickly or by too much,” Bailey cautioned.

“But if the economy evolves as we expect it’s likely that interest rates will continue to fall gradually from here.”

In an attempt to control inflation, which had skyrocketed after the conclusion of the COVID lockdowns and Russia’s invasion of Ukraine, major central banks began lowering interest rates that had been raised earlier this year.

While Norway made no changes, Sweden’s central bank cut borrowing prices by 0.5 basis points on Thursday, its largest cut in ten years and fourth this year.

Analysts predict that the Fed will later reduce by 25 basis points, a move that is unlikely to have been impacted by Donald Trump’s comeback to power.

The BoE update comes after Britain’s new Labour government’s first budget, which included more borrowing and tax increases, was released last week.

As UK inflation returned to normal levels in August, the BoE lowered its main rate for the first time since early 2020, from a 16-year peak of 5.25 percent.

In September, however, it chose not to make a second consecutive cut. No October meeting was held.

Between the second half of last year and late 2021, when borrowing costs were at a record-low 0.1 percent, the BoE increased them 14 times.

AFP