Bank of England finally cuts interest rates in closest vote for a long time

Bank of England finally cuts interest rates in closest vote for a long time

12:17 PM, 1st August 2024, About A day ago 7

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The Bank of England has announced a major cut in interest rates for the first time in four years.

The BoE has cut interest rates from 5.25% to 5%, offering a sigh of relief to many people.

In a close vote, the Bank of England’s Monetary Policy Committee voted 5 to 4 to cut interest rates by 0.25%.

Economists split over whether Bank of England would cut rates

Economists were split on whether the Bank of England would cut interest rates, especially as the Federal Reserve in the US decided to keep rates the same.

The Bank’s decision came after the consumer price index rate of inflation dropped to 2% – the MPC’s target.

The MPC summary reported: “The Committee voted to reduce Bank Rate to 5%. It is now appropriate to reduce slightly the degree of policy restrictiveness. The impact from past external shocks has abated and there has been some progress in moderating risks of persistence in inflation. Although GDP has been stronger than expected, the restrictive stance of monetary policy continues to weigh on activity in the real economy, leading to a looser labour market and bearing down on inflationary pressures.

“Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further.”

It looks like the value of Sterling gave the Monetary Policy Committee the headroom it required to vote for the decrease in Base Rate:

“The level of sterling was also likely to be an important driver of UK import prices. The effective exchange rate had appreciated further since the Committee’s previous meeting, such that it was over 3% higher than its level at the start of this year. The appreciation was likely to weigh on the outlook for UK import prices and inflation, all else equal, but the extent of pass-through was likely to depend on the underlying driver of the appreciation.”


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JB

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12:38 PM, 1st August 2024, About A day ago

Great! Now let's get on with selling our properties

Paul

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13:13 PM, 1st August 2024, About A day ago

I can see why we don't want to drop the BOE rate too quickly, to avoid, I think they call it the 'dead cat bounce' drop too quickly and inflation rises and then you have to increase BOE. Prudent yes. Would I like it to be lower ? Yes. Can I ride it out ? Yes.

Chris Mills

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14:28 PM, 1st August 2024, About 23 hours ago

Don't hold your breath. The unfunded 5.5% pay rise to the public sector, pay rise for doctors and a strike leading to Labour capitulation by GP Surgeries will fester then start affecting inflation upwardly. They're just the people who can't say no.

Jim Hearnden

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14:42 PM, 1st August 2024, About 23 hours ago

Hmm Liebor government and they lower the interest rate. I have lived under 3 labour governments and low interest rates will be a short lived thing from my experience.

JB

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16:07 PM, 1st August 2024, About 21 hours ago

There are redundancies going on too. Eg JP Morgan : 500. Dyson :1000.

Dylan Morris

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17:52 PM, 1st August 2024, About 19 hours ago

It’s likely that war could break out soon in Europe or the Middle East or even both. Oil could easily go to $150 a barrel if not $200 then you can kiss low inflation goodbye.
Andrew Bailey said today that the public sector pay increases won’t affect the CPI. I’m guessing it’s only private sector wage increases that they measure (but even then that’s not a component of the CPI as far as I’m aware). It’s a strange comment as clearly if public sector workers have more money in their pockets they will spend more pushing up inflation.

Cider Drinker

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21:06 PM, 1st August 2024, About 16 hours ago

As a net saver, I’m disappointed. No doubt savings rates will drop soon enough.

I’d wager that interest rates will be higher in August next year.

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