The Bank of England has lowered its base interest rate to 4.75% in its second rate cut this year, following an earlier reduction from 5.25% to 5% in August.
This move, widely anticipated by financial experts, aims to ease the cost of borrowing for consumers, potentially stimulating spending in the economy.
The base rate serves as a key influence on lending costs. By lowering rates, BOE hopes to make borrowing more affordable, which could encourage both consumer and business spending. However, some analysts note that the intended benefits may take time to reach households facing high living costs and inflationary pressures.
Chancellor Rachel Reeves welcomed the decision, acknowledging that it could provide some relief but warning that economic challenges remain significant for UK households. Her comments reflect ongoing concerns about the cost-of-living crisis, as inflation continues to erode purchasing power for many families.
BOE Governor Andrew Bailey indicated that further gradual reductions in interest rates could follow if economic conditions permit. However, he emphasised the importance of keeping inflation near the 2% target to maintain economic stability.
BOE’s decision comes shortly after last week’s Budget, which some experts suggest may have contributed to rising inflationary pressures. Economic observers believe the Bank of England’s approach reflects a balancing act, as it seeks to control inflation without stifling economic activity. The recent rate cut is therefore seen as a measured step towards fostering growth while maintaining a close watch on inflation trends.
Source: BBC
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