According to PANews, the Bank of England has reiterated its cautious approach to reducing borrowing costs, suggesting that its rate-cutting actions may soon conclude. The central bank noted that as interest rates decrease, the restrictive nature of monetary policy diminishes, no longer directly stating that the policy remains restrictive. The Bank of England emphasized that there is no predetermined path for interest rates.
The halt in rate cuts could be a setback for Chancellor Reeves and Prime Minister Starmer, who have been striving to fulfill promises to voters by accelerating the UK's sluggish economic growth. Governor Bailey described the decision for the fifth rate cut since last August as "very balanced," although he acknowledged that rates are still on a downward trajectory.
Among the nine policymakers, four sought to maintain borrowing costs due to concerns over high inflation. The Monetary Policy Committee faced difficulty reaching consensus, leading to its first-ever occurrence of two rate votes. The committee is divided on how to address inflation, which the Bank of England predicts will soon double its 2% target, and the worsening unemployment situation.
Governor Bailey and four colleagues supported reducing the interest rate from 4.25% to 4%. The four members advocating for unchanged rates included Deputy Governor for Monetary Policy Lombardelli, who for the first time diverged from the majority, and Chief Economist Pill, who also voted to keep the rate at 4.25%.