The Bank of England has cut interest rates to 4% in a narrow 5-4 vote, signaling a focus on combating sluggish economic growth and rising unemployment, rather than managing inflation. Although inflation remains at 3.6%, the Bank seems less concerned about inflationary pressures now. A decline in wage growth suggests future rate cuts may occur, potentially bringing rates down to 3.75%. The Bank will likely proceed with cautious, gradual rate reductions towards 2026, as uncertainties in both domestic and international economies persist, alongside a long-term expectation of above-target inflation in the UK.
The Bank of England has narrowly voted to cut interest rates to 4%. Despite inflation remaining sticky at 3.6%, the Bank is prioritizing combating sluggish growth and rising unemployment.
After a year of high wage growth, a decline is now being seen, lessening fears of further inflation. Earnings growth is expected to level out at an acceptable level.
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