Bank of England lowers its main interest rate by 0.25%, its first cut in over four years

The Bank of England has cut interest rates for the first time since the onset of the COVID-19 pandemic in early 2020.

In a statement yesterday, the bank said that by a 5-4 margin, its nine-member policymaking panel backed a quarter-point reduction in its main interest rate to 5%, from the 16-year of 5.25%.

Economists were divided as to whether the bank, which is independent of government, would cut rates given persistent price pressures in the services sector, which accounts for around 80% of the British economy.

Yet inflation in the U.K overall has already hit the bank’s target of 2%.

Interest rates in the U.K. have been unchanged for a year after a dramatic series of hikes but it’s been clear for a few months that the Monetary Policy Committee had been moving towards a cut.

“Inflationary pressures have eased enough that we’ve been able to cut interest rates today,” said Bank Gov. Andrew Bailey. “But we need to make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much. Ensuring low and stable inflation is the best thing we can do to support economic growth and the prosperity of the country.”