The Bank of England has dropped its interest rate to 4% amid rising worries about stagnant economic growth and mounting inflation. The narrow 5-4 vote reveals a sharp divide in the central bank’s strategy team.
While the cut was expected by markets, the tone of the announcement raised eyebrows. Bailey emphasized caution, noting that food price inflation was likely to surge due to global crop failures and higher labor costs.
The Chancellor welcomed the cut, citing progress in fiscal reforms. However, critics argue the government’s policies—particularly tax increases—may be worsening the inflation outlook.
The Bank projected food inflation would peak at 5.5% before year-end. It blamed not only global shocks but also new domestic charges like recycling mandates and wage increases for driving prices higher.
In this climate, further rate cuts may be delayed. With inflation remaining stubborn and growth slowing, the UK faces a complicated path ahead.
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