The Bank of England cut its base interest rate to 4% in a narrow decision by its rate-setting panel, citing concerns that rising food prices could soon drive inflation up to 4%.
Governor Andrew Bailey described the vote as “finely balanced” and signaled that although the direction remains downward, further reductions will proceed with caution. The decision marks the lowest rate since March 2023.
Chancellor Rachel Reeves welcomed the rate cut, suggesting it validated her government’s economic approach. However, criticism is mounting as the Bank cited tax increases and wage hikes as contributors to inflationary pressures.
With inflation at 3.6% and unemployment ticking up, the Bank also warned that climate-related supply disruptions and domestic labor costs could push food inflation to 5.5% by year’s end.