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Market Analysis

Bank of England Cuts Interest Rates for First Time in Four Years
Amos Simanungkalit · 20.5K Views

11

 

On Thursday, the Bank of England implemented its first interest rate cut in over four years, reducing the key rate to 5%.

The decision saw a narrow vote of 5-4 in favor of the cut, with Governor Andrew Bailey emphasizing a cautious approach moving forward. The Bank rate had remained at a 16-year high of 5.25% since August 2023.

The British central bank's lack of clear signaling had created uncertainty around the decision until the last moment. As of 8:15 a.m. in London, markets had priced in a 61% chance of a 25-basis-point cut at the August meeting.

Following the BOE’s decision, U.K. gilt yields declined as markets assessed the new interest rate outlook. The yield on the 10-year gilt fell by over 9 basis points to 3.880%, while the 2-year gilt yield dropped by more than 10 basis points to 3.702%.

The BOE generally offers less forward guidance than some other central banks, and its communications were particularly limited in the recent six-week period due to the U.K. general election in early July.

Additionally, the Bank of England released its quarterly Monetary Policy Report on Thursday, which included projections for economic growth and inflation. The Monetary Policy Committee is scheduled to meet again on September 19, with further meetings planned for November and December this year.

 

 

Paraphrasing text from "CNBC" all rights reserved by the original author.

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