In a move to support the UK economy, the Bank of England reduced its interest rate to 4%, its lowest level since March 2023. However, it warned that surging food prices may push inflation as high as 4%.
The decision came after a rare split vote, with four members of the MPC favoring a hold. Bailey described the path ahead as increasingly uncertain, even as the central bank aims to ease borrowing costs.
City investors reacted swiftly, sending the pound higher following the cautious tone struck by the Bank’s leadership. Meanwhile, political pressure is building around the Chancellor’s economic approach.
The Bank cited both global and domestic factors behind food inflation. Labour costs, higher taxes, and new recycling charges are putting pressure on supermarkets—costs that are being passed on to consumers.