Interest rates cut to 4% as UK inflation picks up

UK interest rates have been cut to their lowest level since March 2023 despite the Bank of England predicting a sharp rise in inflation amid accelerating food prices.

The central bank chose to reduce interest rates to 4% from 4.25%, pointing towards a recent fall in wage inflation and reduced uncertainty over the impact of US tariffs.

The cut came after the Bank’s nine-person rate-setting committee was forced to take a second vote for the first time in its history.

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Vote

The Bank’s Monetary Policy Committee (MPC) initially saw four of its committee vote for the 0.25 percentage point reduction, four vote to keep rates at 4.25% and one, Alan Taylor, vote for a 0.5 percentage point cut.

Governor Andrew Bailey then led a second vote, where Mr Taylor gave his backing for a cut to 4%, providing a majority of five to four.

Mr Bailey said: “We’ve cut interest rates today, but it was a finely balanced decision.

“Interest rates are still on a downward path, but any future rate cuts will need to be made gradually and carefully.

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