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The Bank of England cut its main interest rate by a quarter of a percentage point to 4.75% on Thursday after inflation across the U.K. fell significantly, relieving some pressure on borrowers who have faced elevated mortgage and loan costs.
The bank said eight of the nine members of its rate-setting panel backed the reduction — the second in three months — while one opted to keep borrowing costs on hold. The latest cut comes after inflation in the U.K. fell to an annual rate of 1.7%, its lowest level since April 2021.
Though inflation has fallen below the bank’s target of 2%, Governor Andrew Bailey cautioned that interest rates would not be falling too fast over coming months, partly because last week’s budget measures from the new Labour government would likely see prices rise by more than they would otherwise have done.
“We need to make sure inflation stays close to target, so we can’t cut interest rates too quickly or by too much,” he said. “But if the economy evolves as we expect it’s likely that interest rates will continue to fall gradually from here.”
He added that it’s very unlikely that interest rates will fall to the very low levels that persisted in the wake of the global financial crisis in 2008.
