The Bank of England today cut UK interest rates by 0.25%.
The move lowers the base rate to 4% – the fifth cut after a peak of 5.25% in August last year, in response to ailing UK economic performance.
The main reason cited for the cut was inflation, which has been persistently tracking north of the BoE’s target of 2% over the last few years. It’s currently at 3.4%, with some analysts expecting it to rise to 3.9% by the end of the next quarter.
Rising unemployment
Another factor in today’s decision was a slowdown in the jobs market. The unemployment rate was at 4.7% from March to May, and is expected to rise in the quarter from June to August. Data on this is set to be announced on next week.
MPC close split
The BoE Monetary Policy Committee (MPC) were divided on today’s rate with. Five of the nine members voted in favour wtih the remaining four against. Member Alan Taylor voiced concern about a coming recession and wanted to cut by 0.5% but changed his mind in a second vote to join the members voting for a 0.25% cut.
News welcomed buy Brum MP
Preet Gill, Labour MP for Birmingham Edgbaston, said local homebuyers, and homeowners on variable mortgage rates, stood to save £720 a year thanks to falling interest rates since Labour came to power.
The local savings are part of wider national benefits that have seen families across the UK save an average of £980 annually on their mortgage costs, she said.
She added: “When Labour took office, our urgent priority was to restore economic stability after 14 years of Conservative failure. The five interest rate cuts we’ve seen since then are directly benefiting Birmingham homeowners with lower mortgage costs”.
She took the opportunity to lash out at the previous Conservative governments’ poor performance and warned of the Reform’s “unfunded spending plans.”
A look forward
Andrew Bailey, Governor of the BoE, said the decision was “finely balanced” but that rates were still on a downward path.
“Any future rate cuts will need to be made gradually and carefully”, Bailey said.
