Bank of England Makes First Rate Cut Since 2020 Amid Inflation Concerns

The Bank of England has cut interest rates from a 16-year high to 5%, following a narrow 5-4 vote. Governor Andrew Bailey emphasized caution in future cuts to keep inflation in check. While the decision met forecasts, financial markets showed mixed reactions. This marks the first rate cut since the COVID-19 pandemic began.

In a pivotal decision, the Bank of England has cut interest rates from a 16-year high to 5%, a move led by Governor Andrew Bailey. The decision was clinched by a narrow 5-4 vote, emphasizing the divided opinions among policymakers on inflationary pressures.

"We need to make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much," Bailey stated, stressing a cautious approach going forward. The reduction aligned with a Reuters poll forecast but was met with tepid market reactions, with sterling remaining steady and bond yields slightly lower.

This rate cut is the first since March 2020 and follows a prolonged period of unchanged rates. The decision comes as British consumer price inflation returned to the BoE's 2% target, further prompting a re-evaluation of economic forecasts and the potential impact of new governmental fiscal policies.

(With inputs from agencies.)