The News
The UK central bank cut interest rates for the second time this year, lowering the cost of borrowing amid rising concern over inflation.
The main interest rate was cut from 5% to 4.75%, as expected, marking the last time the bank is expected to adjust rates in 2024. The decision came after the UK inflation rate reached a three-year low, but the bank’s Governor Andrew Bailey remained cautious about the pace of cuts.
Bailey said during a press conference that interest rates will likely continue to fall “gradually from here,” but cautioned that the UK government’s new budget, which is expected to raise taxes by £40 billion (about $51 billion), makes the outlook for future policy easing more complicated, CNBC reported.
The bank said the Labour Party’s plan could raise consumer prices, and could mean the overall rate of inflation could take longer to stabilize around the 2% target, the Financial Times noted.
The decision comes as central bankers across the world weigh the potential implications of a second Trump presidency in the US for the global economy. While most central banks have been on a rates-cutting regime for months, Trump’s tariff agenda — which, if implemented, would worsen inflation — could pressure central banks to raise the cost of borrowing again.