Bank of England Cuts Interest Rates Amid Inflation Concerns

The Bank of England cut interest rates to 5% from a 16-year high in a close decision. Governor Andrew Bailey emphasized caution in future rate reductions due to ongoing inflation concerns. Following the cut, the UK saw the pound slip against the dollar and bond yields fall.

The Bank of England made a significant move by cutting interest rates from a 16-year high, reducing them by a quarter-point to 5%. The close 5-4 decision, led by Governor Andrew Bailey, highlights a split among policymakers on whether inflation pressures have sufficiently eased.

This is the first cut since March 2020, providing a potential boost to the new UK government aiming to accelerate economic growth. Despite the rate cut, Bailey stressed that the central bank is not committing to a series of rapid reductions and will make decisions on a meeting-to-meeting basis.

Sterling fell to its lowest level against the U.S. dollar since early July following the announcement, while bond yields saw a slight decline. Investor sentiment suggests there is a 55% probability of another rate cut in September, but the BoE remains tight-lipped about its future moves.

(With inputs from agencies.)