The Bank of England took action to stimulate a struggling UK economy by cutting interest rates and significantly lowering its growth predictions for 2025. The move comes amidst global uncertainty and concerns about stagflation.
The Bank of England has taken a decisive step to address the challenges facing the UK economy, cutting interest rates by a quarter-point to 4.5 percent and significantly revising its growth projections downwards for 2025. This move comes amidst a backdrop of sluggish economic growth and heightened global uncertainty . The Bank's Monetary Policy Committee, in a unanimous decision, opted to lower benchmark rates from 4.75 percent.
While seven members favored a quarter-point reduction, two, including Catherine Mann, a previously hawkish member, advocated for a more aggressive half-point cut. This suggests a growing concern within the committee about the UK's economic trajectory. The Bank now anticipates GDP growth of just 0.75 percent this year, halving its November forecast of 1.5 percent. This downward revision reflects the impact of a range of factors, including the rising cost of living, increased energy prices, and the ongoing global economic slowdown. The Bank also acknowledges the potential impact of the new US administration's trade policies, particularly the threat of tariffs on goods imported from the UK. While acknowledging the uncertainties surrounding global economic conditions, the Bank maintains that it will adopt a cautious approach to further rate reductions. It predicts a gradual pickup in growth from mid-year onwards, with forecasts of 1.5 percent for both 2026 and 2027. However, the Bank warns that the path to recovery will be challenging, with inflation expected to rise to 3.7 percent in the third quarter of this year before easing back to around 2.5 percent in 2026 and 2 percent in 2027. This persistent inflation, coupled with the weak growth outlook, raises concerns about stagflation – a situation where inflation remains high while economic growth stagnates.The Bank's decision has been met with mixed reactions. Chancellor of the Exchequer Rachel Reeves welcomed the rate cut, arguing that it would provide much-needed relief for families and businesses struggling with the cost of living. However, she also acknowledged that the growth rate remains unsatisfactory. The opposition Conservative Party criticized Reeves' handling of the economy, claiming it had limited the scope for future rate cuts. Financial markets reacted positively to the news, with the pound falling against the dollar and the FTSE 100 reaching a record intraday high. The bond market also rallied, with yields decreasing as investors anticipated further rate reductions.
Finance Bank Of England Interest Rates UK Economy Inflation Growth Forecast Stagflation Global Uncertainty
United Kingdom Latest News, United Kingdom Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Bank of England interest rate cuts and how you may be affectedThis week has seen inflation figures drop, changing many economists' outlook on future interest rate changes
Read more »
Mortgage Rate Cuts Spark Hope Amidst Bank of England DecisionSeveral mortgage providers are reducing rates ahead of the Bank of England's crucial base rate announcement. While some lenders have increased rates recently, others like Barclays, Accord, and Coventry Building Society are offering cuts of up to 0.27 percentage points. This trend suggests a potential shift in mortgage rates, bringing relief to homeowners and first-time buyers who have experienced volatility in the market.
Read more »
Bank of England cuts interest rates to 4.5% – how it affects mortgages and savingsInterest rates have been cut by 0.25 percentage points today in good news for mortgage holders
Read more »
Bank of England Cuts Interest Rates to 4.5% in Bid to Stimulate GrowthThe Bank of England has cut interest rates to 4.5% from 4.75% in an attempt to boost the UK economy, which is narrowly avoiding a recession. The move comes as the Bank lowers its growth forecast for 2024 to 0.75% from its previous prediction of 1.5%. The decision was welcomed by some economists and industry leaders, who believe it will encourage borrowing and investment. However, others argue that the cut may not be enough to address the underlying economic challenges facing the UK.
Read more »
Bank of England Cuts Interest Rates to 4.5%The Bank of England has lowered the base interest rate from 4.75% to 4.5%, its lowest point in 18 months. This decision aims to alleviate cost-of-living pressures and encourage business borrowing. While Chancellor Rachel Reeves welcomes the cut, she expresses concerns about the growth rate. The Bank's governor, Andrew Bailey, anticipates further rate reductions as inflation eases, but acknowledges potential economic challenges.
Read more »
Bank of England Cuts Interest Rates, Boosting Housing Market and HomeownersThe Bank of England has lowered the UK base rate to 4.5 percent, marking a positive shift for the housing market and homeowners. This move is expected to lead to lower mortgage rates and increased affordability for both existing and prospective homeowners.
Read more »