"The backdrop of a slowing domestic economy in addition to underlying inflationary pressures easing, provided the Bank of England with a strong basis to lower interest rates today. The MPC gave little away in the run up to today’s meeting, opting to let the data flow guide their decision amidst growing domestic and global uncertainty.
“Today’s decision to cut interest rates will provide some relief for both households and businesses. However, it is unlikely to materially change the fiscal challenges the Chancellor faces ahead of the Spring Statement next month. The Bank of England is set to continue its cautious approach with the number of interest rate cuts limited this year. This will come at a substantial cost in the form of higher debt interest payments and weaker economic activity as interest rates stay higher for longer.
"The Bank of England revised up its inflation outlook, due to near term increases in energy prices, but downgraded its growth forecast for this year on the back of recent weak activity. The tone in the minutes signals a clear easing bias for all MPC members and leaves the door open for further interest rate cuts this year. Nonetheless, domestic uncertainty remains with the upcoming tax rises and the increase in the National Living Wage. The Bank will assess the second-round effects of these policy changes, and whether they lead to a rebound in domestic price pressures. This will likely mean the pace of cuts will be gradual, and overall, we expect only two further cuts, leaving base rates at 4% by the end of 2025.”
