The Bank’s Monetary Policy Committee has reduced rates for the first time since 2020.
The Bank of England’s Monetary Policy Committee has voted 5-4 to reduce Bank Rate to 5% – the first reduction since the early days of the Covid-19 pandemic in March 2020.
Four members preferred to maintain Bank Rate at 5.25%.
This month marks a full year since the Bank of England base rate rose to a 16-year high of 5.25%.
The MPC noted that twelve-month CPI inflation was at its 2% target in both May and June and the Committee expects the fall in headline inflation to “continue to feed through to weaker pay and price-setting dynamics”.
As a result, the MPC said “it is now appropriate to reduce slightly the degree of policy restrictiveness”.
It added: “The impact from past external shocks has abated and there has been some progress in moderating risks of persistence in inflation. Although GDP has been stronger than expected, the restrictive stance of monetary policy continues to weigh on activity in the real economy, leading to a looser labour market and bearing down on inflationary pressures.”
Rozi Jones (Financial Reporter)