Bank of England Reduces Bank Rate to 4.75%

The Bank of England (BoE) has announced a reduction in the Bank Rate to 4.75%, marking the second cut in its current easing cycle. This decision is part of a cautious approach to the rate path, particularly in light of recent fiscal stimulus.

According to the Monetary Policy Committee (MPC), the measures from the Autumn Budget are projected to enhance GDP by 0.75% within a year and contribute an additional 0.5% to the Consumer Price Index (CPI) at its peak.

The MPC has updated its short-term growth and CPI forecasts upwards, indicating that there is no longer any spare capacity in the UK economy for the upcoming year.

Additionally, the MPC has expressed a preference for gradual easing if economic developments align with their expectations, suggesting a higher threshold for any further rate cuts by December.

Nonetheless, the MPC has left a narrow possibility for a rate reduction in December, dependent on significant negative developments in domestic prices and wages that could imply a quicker return of inflation to the target rate.

Upcoming reports on growth, inflation, and the labor market will be essential in assessing the validity of the BoE's forecasts and may influence the MPC's decision-making as the next meeting in December approaches.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.