The Bank of England reduced interest rates by 25 basis points (bps) to 4.75 per cent, saying UK inflation is now close to the 2 per cent target.
It marks the apex bank’s second such reduction in 2024, after it began its easing cycle in August.
Despite bond market volatility following new Labour Chancellor Rachel Reeves’ first budget last week, which included £40 billion ($52 billion) in tax increases, the bank went ahead with a widely anticipated cut.
Interest rates will continue to fall gradually if things evolve as expected, the bank said, adding that inflation is likely to rise to around 2.75 per cent over the next year as household energy prices provide less of a drag than in recent months.
It is expected to fall back to 2 per cent after that.
“We can’t rule out more global shocks that keep inflation high. For example, developments in the Middle East could increase inflation by causing oil prices to rise.” Bank of England said in a statement.
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