The Bank of England cut interest rates from a 16
year high on Thursday but it was a close decision
. Five members of the Central Bank's governing body voted
in favor of the move believing inflation pressures had eased
enough for a cut while four were against. They
agreed to lower rates by a quarter point to 5%
. However, Central Bank Governor Andrew Bailey said they
would move cautiously going forward. He said they needed
to make sure inflation stays low and be careful not
to cut interest rates too quickly or by too much
have been on hold for almost a year. And
Thursday saw the first cut since the start of the
pandemic in March 2020. British consumer price inflation returned
to the bank's 2% target in May and stayed there
in June. This leaves British inflation lower than in
the eurozone and United States. The central bank is
focused on what it sees as medium term drivers of
inflation. It includes services, prices, wage growth
and more general tightness in the labor market. Services
. Inflation came in well above forecasts in June.
But the bank put this down to volatile components,
wage growth at nearly 6% is almost double the rate
. The bank views as consistent with 2% inflation but
it is slowing in line with expectations. However,
the bank warned there is a risk, inflation pressures
might prove more persistent and keep it above target for
longer than its main forecast.