Bank of England cuts rates by quarter point to 3.75%

{"text":[[{"start":null,"text":"

"}],[{"start":9.98,"text":"The Bank of England cut interest rates by a quarter point to 3.75 per cent on Thursday, responding to signs of stagnation and cooling inflation while cautioning that future decisions on reductions were likely to be a “closer call”."}],[{"start":26.91,"text":"The central bank’s Monetary Policy Committee voted five to four in favour of a sixth rate cut since the summer of 2024, as it forecast that inflation is likely to fall close to its 2 per cent target in the second quarter of 2026."}],[{"start":47,"text":"Andrew Bailey, BoE governor, said he saw scope for “some additional policy easing” but added that the key question was whether inflation settled at the central bank’s target in an “enduring way”."}],[{"start":59.33,"text":"“We’ve passed the recent peak in inflation and it continues to fall, so we have cut interest rates for the sixth time to 3.75 per cent today,” Bailey said. “We still think rates are on a gradual path downward. But with every cut we make, how much further we go becomes a closer call.”"}],[{"start":78.87,"text":"The move follows official data this week that pointed to a slowing economy, with inflation easing more than expected in November to 3.2 per cent and the unemployment rate climbing to a four-year high of 5.1 per cent in the three months to October."}],[{"start":97.21000000000001,"text":"The pound strengthened after the widely expected decision, but later gave up the gains to trade flat against the dollar by late afternoon at $1.337."}],[{"start":110.19000000000001,"text":"The rate cut was seen by investors as a near certainty, but some had expected a more dovish signal from the BoE after November’s surprisingly soft inflation reading and weak jobs data."}],[{"start":123.59000000000002,"text":"Hetal Mehta, chief economist at St James’s Place, said the decision was “slightly more finely balanced than expected, given the raft of downbeat data in recent days”."}],[{"start":134.69000000000003,"text":"“This is a cautious cut,” said Michael Saunders, a senior adviser at Oxford Economics and former MPC member. “Further easing is likely to be gradual and is not guaranteed.”"}],[{"start":148.17000000000002,"text":"Bailey’s remarks indicate that the central bank is approaching the end of its current rate-cutting cycle, in a signal that chimes with other advanced economies. The European Central Bank held its rate at 2 per cent on Thursday, with investors betting borrowing costs will fall no further from here."}],[{"start":168.75,"text":"Traders in swaps markets continued to expect another one or two further quarter-point UK cuts by the end of next year, but at a slightly slower pace."}],[{"start":178.65,"text":"The two-year gilt yield, which is sensitive to changes in interest rates, rose 0.02 percentage points to 3.74 per cent."}],[{"start":189.23000000000002,"text":"Investors were reacting to a “divided vote and lack of commitment on [the] pace of cuts”, said Pooja Kumra, rates strategist at TD Securities."}],[{"start":198.37,"text":"The meeting exposed persistent divisions on the MPC, as rate-setters debate whether to prioritise boosting anaemic growth or containing inflation. Bailey joined deputy governors Sarah Breeden and Dave Ramsden in voting for a cut, alongside external MPC members Swati Dhingra and Alan Taylor. This majority group felt the “disinflation process was on track”."}],[{"start":225.17000000000002,"text":"The dissenters — deputy governor Clare Lombardelli, chief economist Huw Pill and external MPC members Megan Greene and Catherine Mann — placed more emphasis on the possibility of “prolonged inflation persistence”."}],[{"start":242.31,"text":"Forward-looking wage indicators remain “elevated”, with BoE agents around the country predicting pay settlements of 3.5 per cent in 2026, the bank said."}],[{"start":254.25,"text":"The central bank said policies announced in last month’s Budget to contain increases in the cost of living are set to help reduce headline inflation next year, cutting around a half point from CPI inflation in April."}],[{"start":269.09,"text":"Subdued economic growth and a weakening jobs market will also play a part in bringing down inflation. A report from the BoE’s network of agents described a “lacklustre” economy, with policy uncertainty ahead of the November budget weighing on sentiment."}],[{"start":287.97999999999996,"text":"BoE staff now expect zero GDP growth in the final quarter of the year, capping another year of tepid economic performance."}],[{"start":297.96,"text":"Private-sector economists expect the UK to expand by 1.4 per cent this year — softer than the US, but broadly in line with the Eurozone, according to a December survey from Consensus Economics."}],[{"start":312.75,"text":"“Since November, the risk from greater inflation persistence had become somewhat less pronounced, while the risk to medium-term inflation from weaker demand remained,” according to minutes from the rate-setting meeting."}],[{"start":326.99,"text":"Future rate reductions will hinge heavily on the MPC’s judgment on the “neutral” level for interest rates, where the economy is neither restricted nor spurred."}],[{"start":338.59000000000003,"text":"“While I see scope for some additional policy easing, the path for Bank Rate cannot be prejudged with precision, recognising in part the more limited space as Bank Rate approaches a neutral level,” said Bailey."}],[{"start":353.38000000000005,"text":"The decision was welcomed by chancellor Rachel Reeves. She said the cut was “good news for families with mortgages and businesses with loans. But I know there’s more to do to help families with the cost of living”."}],[{"start":376.1600000000001,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1766106141_7765.mp3"}