Bank of England cuts interest rates to 4.75%

It is the second reduction in rates this year and is the first time rates have been below 5% since June 2023
The Bank of England has cut interest rates to their lowest level since 2023.
Policymakers announced on Thursday that interest rates would be set at 4.75%, down 0.25 percentage point from 5%.
It is the second reduction in rates this year and is the first time rates have been below 5% since June 2023.
Bank of England governor Andrew Bailey said: “We need to make sure inflation stays close to target, so we can’t cut interest rates too quickly or by too much.”But if the economy evolves as we expect it’s likely that interest rates will continue to fall gradually from here.”
Members of the Monetary Policy Committee (MPC) voted 8-1 in favour of cutting the base rate.
Reacting to the announcement, Chancellor Rachel Reeves, said: “Today’s interest rate cut will be welcome news for millions of families, but I am under no illusion about the scale of the challenge facing households after the previous Government’s mini-budget.
“This Government’s first Budget has set out how we are taking the long-term decisions to fix the foundations to deliver change by investing in the NHS and rebuilding Britain, while ensuring working people don’t face higher taxes in their payslips.”
Rates had been sitting at 5% after being cut from 5.25% in August, in what had been the first reduction in rates since 2020.
Bank of England committee members then voted to keep them at that level in September.
Thursday’s cut follows official data showing the UK Consumer Prices Index (CPI) inflation fell to 1.7% in September, the lowest level since April 2021.
The slowdown, from 2.2% in August, was driven by a sharp slump in petrol prices and lower airfares.
Experts said inflation falling below the Bank’s 2% target level has encouraged policymakers to ease interest rates, releasing some more pressure on borrowers and mortgage holders across the UK.
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The Monetary Policy Committee decision comes a week after Reeves announced almost £70 billion of extra annual spending in the Budget, funded by business-focused tax hikes and additional borrowing.
The Office for Budget Responsibility (OBR) said the sharp increase in spending will contribute to higher inflation, although it will also help drive stronger economic growth.
Inflation is forecast to average 2.5% this year and 2.6% next year before coming down, assuming “the Bank of England responds” to help bring it to the target rate, the OBR said.
It has prompted economists to reel in predictions for a rapid succession of rate cuts over the next year.
James Smith, developed market economist for ING, said: “The Budget won’t change the Bank’s decision to cut rates again this week.
“But it does question our long-held view that rate cuts will speed up from now on.
“The risk is that this happens later, and the Bank decides to keep rates on hold again in December.
“A cut at the final meeting of the year looks fairly 50:50, and a lot will depend on the two inflation reports we get between now and Christmas.”
The latest decision also comes a day after Donald Trump was declared victorious in the US presidential election.
Some economists said Trump’s economic policies, including proposed tax cuts and higher trade tariffs, are inflationary.
This could prompt policymakers to keep interest rates higher for longer, with knock-on implications for monetary policy in the UK.
The US Federal Reserve will also announce the nation’s interest rate on Thursday, with financial markets also betting on a 0.25 percentage point reduction.
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