The Bank of England has reduced interest rates to 4%—the fifth rate cut in a year—in an attempt to stimulate the economy. But officials warned that inflation could rise again due to persistent food price increases.
In a historic move, the Monetary Policy Committee (MPC) held two votes before reaching its final decision, highlighting a deeply divided view on how to respond to the UK’s economic fragility.
Governor Andrew Bailey said the decision to lower the rate was “finely balanced” and stressed that further reductions would be taken cautiously. Inflationary risks, especially from food and wages, remain elevated.
New forecasts show food prices may increase by 5.5% before the end of the year. Rising labor costs and environmental fees are being passed down to shoppers, compounding the financial strain on households.
While the Chancellor welcomed the cut, critics argue that government-imposed taxes and regulations are contributing to inflation. As economic uncertainty grows, the Bank may have limited room to maneuver.