BoE Cuts Rates to 4.0% Despite Forecast for Inflation to Hit 4%

Source: Dukascopy Bank SA
The Monetary Policy Committee (MPC) voted by a slim 5-4 majority to cut the Bank Rate by 0.25 percentage points to 4.0%. The decision reflects the substantial disinflation achieved over the past two years and an economy showing subdued growth and emerging slack.



Despite this rate cut, the MPC noted that headline CPI inflation recently rose to 3.5% and is forecast to peak at a temporary 4.0% in September. The committee remains vigilant about the risk that this could add to wage and price pressures, stating that the upside risks to medium-term inflation have slightly increased. Looking ahead, the MPC signaled a "gradual and careful" approach to any further policy easing. The timing and pace of future rate reductions are not on a pre-set path and will depend on incoming data confirming that underlying inflationary pressures continue to ease.
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