The Bank of England has reduced its key interest rate to 4%—the fifth cut in a year—as it tries to revive the UK’s slowing economy. However, concerns are mounting that inflation could soon rise again, especially from food prices.
The Monetary Policy Committee (MPC) voted 5-4 in a rare split, highlighting the uncertainty surrounding the UK’s economic outlook. The cut brings interest rates to their lowest level since March 2023.
Governor Andrew Bailey warned that the easing trend in rates might not continue if inflation continues to rise. He cited supply chain disruptions and policy changes as significant contributors to inflationary pressure.
The Bank’s updated forecast predicts food inflation could reach 5.5%, driven by global weather events and domestic costs such as wage hikes and recycling charges. These costs are now hitting the consumer directly at the tills.
Although the Chancellor praised the rate reduction as proof of economic stability, critics claim her tax policies are worsening the inflation situation. Businesses, too, are voicing concern about rising operational costs.
