The Bank of England has cut interest rates to 4%, their lowest level in more than two years, following a split vote among policymakers that reflects deep uncertainty over the UK’s economic outlook.
In a historic two-round vote, the Bank’s Monetary Policy Committee (MPC) voted 5-4 in favour of a 0.25 percentage point reduction, lowering the base rate from 4.25%. It marks the fifth quarter-point cut in the past 12 months and the first time since the MPC’s formation in 1998 that two ballots were needed to reach a decision.
The initial vote was evenly divided, with four members favouring a cut, four preferring to hold, and one voting for a larger 0.5-point cut. In the second round, five members backed the quarter-point reduction that ultimately prevailed.
The cut, announced at midday on Thursday, comes despite a rise in inflation to 3.6% in June, and represents a carefully balanced move to support a weakening economy under pressure from tax hikes, falling consumer demand, and rising unemployment.
“This was a finely balanced decision,” said Governor Andrew Bailey. “Future rate cuts will need to be made gradually and carefully.”
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