The Bank of England has cut interest rates for the fourth time this year, lowering borrowing costs to their lowest level in almost three years as policymakers forecast that inflation will fall back to the 2 per cent target by spring.
Members of the Bank’s nine-strong monetary policy committee (MPC) voted narrowly, by five votes to four, to reduce the base rate by a quarter of a percentage point to 3.75 per cent, down from 4 per cent. The decision delivers immediate relief to mortgage holders and businesses with variable-rate loans.
The Bank said inflation was now expected to fall close to target within six months, helped in part by measures announced in last month’s budget that will ease household costs. Officials estimate that government decisions, including removing some levies from energy bills, extending the fuel duty freeze and cancelling a planned rail fare rise, could reduce inflation by as much as 0.5 percentage points and bring forward the disinflation process by around six months.
Andrew Bailey, governor of the Bank of England, said the peak in inflation had passed but warned that future rate cuts were not guaranteed.
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