The Bank of England has decided to cut interest rates for the first time since the beginning of the Covid-19 pandemic, providing some relief to households and businesses affected by the ongoing cost of living crisis.
Key Details:
- Interest Rate Cut: Reduced to 5%
- Previous Rate: 5.25%
- Change: 0.25 percentage points
- First Rate Cut Since: March 2020
- Current Rate: 5%
The Monetary Policy Committee voted by a majority of 5-4 to reduce #BankRate to 5%. Find out more: https://t.co/zBZeLlwSxD pic.twitter.com/YOcCTfER5o
— Bank of England (@bankofengland) August 1, 2024
The central bank’s monetary policy committee voted to lower the base rate by 0.25 percentage points, making this the first reduction in borrowing costs since December 2021. Back then, the Bank of England began raising rates from a historic low of 0.1% to combat inflation.
Background
- Inflation Rate: Held steady at the Bank’s 2% target for June
- Peak Inflation: 11.1% in October 2022
- Cause of Peak: Rise in energy prices following the Russian invasion of Ukraine
Impact and Expectations
The decision comes amid a period of significant economic strain due to high living costs. The Bank’s move is aimed at easing financial pressure and supporting economic stability. The rate cut could also influence future economic policies and market expectations.
| Metric | Current | Previous | Change |
|---|---|---|---|
| Interest Rate | 5% | 5.25% | -0.25% |
| Peak Inflation | 11.1% | – | – |
| Target Inflation | 2% | 2% | – |
The Bank of England’s action marks a significant shift in monetary policy, potentially signaling a more supportive stance towards the economy as it recovers from the impacts of the pandemic and recent global events
