The Bank of England is expected to reduce interest rates from 4.25% to 4% today, marking its fifth cut in a year. This reduction follows signs of a slowing UK economy despite an increase in inflation. The decision is anticipated to be close among the nine-member Monetary Policy Committee, with a predicted 5-4 split. The economy contracted in recent months and businesses have cut payrolls, reflecting economic fragility. The inflation rate remains above the Bank's target, complicating monetary policy decisions.
The anticipated quarter-point cut, from 4.25% to 4%, would continue the Bank's gradual unwinding of monetary tightening after borrowing costs peaked at 5.25% in August 2024.
The economy contracted by 0.3% in April and 0.1% in May, triggering calls for the MPC to ease borrowing conditions and encourage household and business spending.
The slowdown has also been reflected in the labour market. According to HM Revenue and Customs, businesses have reduced their payrolls for five consecutive months.
The jobless rate sits a touch higher than predicted, indicating persistent weakness in the economy.
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