BoE Makes Cautious Rate Cut as Expected, Future Reductions to Remain Gradual

Forex - The Bank of England has cut its benchmark interest rate, becoming the first major central bank to take action since Donald Trump was elected President of the United States, changing the outlook for the global economy.

The BOE indicated that it could further reduce borrowing costs, but this would be at a gradual pace. Policymakers continue to believe that interest rates need to constrain activity to bring inflation down further.

The BOE lowered the benchmark interest rate from 5% to 4.75%, marking the second cut in its last three meetings. The decision was made with a vote of 1 in favor and 8 against. Member Catherine Mann voted to keep the rate at 5%.

The bank forecasts that inflation will fall to target by the beginning of 2027 after a brief rebound in the coming months.

Bank of England Governor Andrew Bailey stated, “We need to ensure that inflation stays close to target, which is why we cannot cut interest rates too quickly or too much. However, if the economy develops as we expect, it is likely that interest rates will continue to gradually fall from here,” reiterating the language he used after the September meeting.