The Bank of England halved its growth projection for the British economy this year as it cut its main interest rate yesterday for the third time in six months.
In a statement, the bank’s nine-member Monetary Policy Committee lowered its main interest rate by a quarter of a percentage point to 4.50%, taking it to its lowest level since mid-2023.
That decision was widely expected in financial markets.
What wasn’t expected was the scale of the growth downgrade in the bank’s accompanying economic forecasts. The bank now predicts that the British economy will only grow by 0.75% this year, down from its previous forecast of 1.5% just three months ago.
If that turns out to be remotely accurate, it will be hugely disappointing news for the U.K.’s new Labour government, which has made growth its number one mission as it will boost living standards and generate funds for cash-starved public services. With growth proving elusive, the party’s popularity has fallen sharply since its election victory.
Treasury chief Rachel Reeves, who faced criticism for raising taxes on business in her first budget last October, welcomed the interest rate cut.
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