UK central bank eases rates as inflation ebbs
The Bank of England on Thursday cut its main interest rate for the first time since the pandemic broke out in 2020, as British inflation has retreated in recent months. In a tight 5-4 vote, BoE policymakers agreed to reduce borrowing costs by a quarter-point to 5.0 percent, the central bank announced following a regular meeting. Governor Andrew Bailey joined four other policymakers in bringing the rate down from a 16-year high, which will ease pressure on borrowers while denting interest earned by savers. Retail banks tend to mirror the direction of BoE policy when setting their own interest rates. "Inflationary pressures have eased enough that we've been able to cut interest rates," Bailey said in a short statement. "But we need to make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much." Britain's annual inflation rate has returned to the BoE target of two percent, after soaring to a four-decade high above 11 percent in late 2022. The US Federal Reserve on Wednesday left its key lending rate unchanged, but noted "some further progress" had been made in bringing inflation down. It is expected to cut in September. Following the BoE's action Thursday, analysts said they expected the British central bank to cut again this year, but maybe not as early as next month. That helped the pound claw back earlier losses. Elsewhere, the European Central Bank has started to trim rates as gains to prices of global goods and services have largely slowed in recent months. By contrast, the Bank of Japan on Wednesday hiked borrowing costs for only the second time in 17 years amid a pickup in the country's inflation. Britain's rate cut comes less than one month after the country elected a new government. The centre-left Labour administration has vowed to grow the UK economy but has already warned that state spending will be hampered by tight finances. (AFP)