The UK’s central bank has slashed interest rates to 4% in a narrow decision aimed at boosting the flagging economy. However, officials warn that inflation could rise sharply in the months ahead.
The MPC’s 5-4 vote was one of its most divided in over 25 years, with some members advocating no change at all. This reflects the difficult balance between supporting growth and managing price pressures.
Governor Bailey made clear that future cuts aren’t guaranteed. He highlighted food inflation as a major concern, driven by both global supply shocks and domestic cost increases.
Food inflation is expected to reach 5.5%, with price rises fueled by climate-related crop failures, higher packaging fees, and rising wages. These expenses are now hitting consumers hard.
Despite reassurances from the Chancellor, experts argue that fiscal policy—especially recent tax hikes—is putting additional pressure on families and businesses.