Bank of England Cuts Interest Rates Amid Persistent Inflation Concerns

The Bank of England lowered interest rates for the first time since 2020, following a narrow decision by its policymakers. The move comes amid ongoing concerns about persistent inflation and the need for tighter monetary policy. Key insights from Governor Andrew Bailey and other policymakers were discussed in a press conference.

For the first time since 2020, the Bank of England has cut interest rates, reducing them from a 16-year high. The decision followed a narrow vote among policymakers, who were divided on whether inflation pressures had sufficiently eased.

Governor Andrew Bailey, speaking at a press conference, stressed that public sector pay could impact demand and serve as a signal. 'On the whole, private sector pay tends to lead public sector pay,' Bailey noted. He emphasized that full clarity would come with the budget, which remains to be finalized.

Bailey declined to predict future rate paths, asserting that the bank would take each meeting as it comes. He acknowledged the persistent nature of inflation and raised critical questions about whether global shocks would unwind or if a more permanent change in wage and price setting would necessitate prolonged tighter monetary policy.

(With inputs from agencies.)