Bank of England cuts rates by 25 basis points but policymakers remain strongly divided

The Bank of England cut interest rates by 25 basis points to 4%, in its August policy meeting on Thursday but policymakers faced difficulties reaching consensus.

The Monetary Policy Committee members voted 5-4 for rate cut, as four members expressed strong concerns about high inflation and voted for unchanged interest rates.

Narrower than expected vote, with two votes needed to reach a decision today (the first vote was 4-4-1), suggests that BoE’s easing cycle might be nearing an end.

With the MPC facing the conflicting risks posed by an inflation rate that the BoE forecasts will soon be double its 2% target and a worsening of job losses, Governor Andrew Bailey and four colleagues backed lowering Bank Rate to 4% from 4.25%.

Governor Bailey stressed that it remains important that the BoE do not cut rates too quickly or by too much and added that they still expected recent higher levels of inflation to be short-lived.

He added that the policymakers remain ready to adjust their course in case of any shift in the balance of risk to the medium term outlook for inflation.