The Bank of England (BoE) has reduced interest rates to 4.75%, marking the lowest level since June 2023. Announced yesterday, this cut follows a previous hold, with the Monetary Policy Committee (MPC) voting to decrease rates from 5% to 4.75%. One MPC member preferred to maintain the rate at 5%.

The decision comes as inflation fell to 1.7% in September, slipping below the Bank’s target of 2% for the first time in over three years. However, inflation is forecast to increase to approximately 2.5% by the year’s end, with expected changes in energy prices impacting annual figures.

The MPC’s decision reflects a continued decline in inflationary pressures, particularly as global shocks have subsided, though domestic pressures remain. According to the committee, the reduction aligns with the need to balance these risks while supporting economic resilience.

The BoE said:

“The best contribution the Bank can make to support economic growth and people’s prosperity is to make sure we have low and stable inflation. If inflation remains close to the target, we expect to reduce interest rates further. But there is a risk that inflation could be higher than expected. Despite overall inflation being at target, prices of some services are still rising too quickly. We need to be careful not to cut rates too much or too quickly, so that inflation remains low and stable for years to come.”

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