Bank of England cuts interest rates to 4.75%

The Bank of England has cut interest rates for the second time this year, with rates now cut to 4.75%. 

The bank voted by a majority of 8–1 to reduce Bank Rate by 0.25 percentage points to 4.75%. One member preferred to maintain the previous rate of 5%.

It had previously decided to hold interest rates at 5% in September, having lowered them for the first time in four years in August.  

The latest cut means interest rates are now at their lowest point in more than a year, as the last time rates were below 5% was June 2023.

The BoE said the cut follows “continued progress in disinflation, particularly as previous external shocks have abated, although remaining domestic inflationary pressures are resolving more slowly”.

UK inflation fell to 1.7% in September, down from 2.2% in August, marking the lowest rate in over three years. This means inflation is now below the Bank of England’s 2% target.

According to the Office for National Statistics, the fall in inflation was largely driven by lower airfares and petrol prices, but partially offset by a rise in prices for food and non-alcoholic drinks, with food prices rising for the first time since early last year. 

In today’s update, the bank said: “There remains significant uncertainty around the outlook for the labour market. Data are difficult to interpret and wage growth has been more elevated than usual relationships would predict. 

“The impact of the budget announcements on inflation will depend on the degree to and speed with which these higher costs pass through into prices, profit margins, wages and employment.”