Bank of England Reduces Interest Rates

(MENAFN) On Thursday, the Bank of England (BoE) reduced its primary interest rate by 25 basis points to reach 4.25 percent, aligning with financial market forecasts.

This latest adjustment marks the fourth consecutive rate reduction since August of the previous year.

The current policy rate now stands at its lowest since May 2023.

According to a formal announcement, the bank foresees a temporary spike in inflation, expecting it to climb to 3.7 percent within the year.

This short-term increase is primarily attributed to fluctuations in energy costs.

Nonetheless, the BoE anticipates inflation will eventually stabilize at its intended 2 percent benchmark.

Despite this forecast, the institution expressed caution due to considerable unpredictability arising from international trade dynamics.

The BoE stated, “Changes in global trade tariffs mean the outlook for inflation is particularly uncertain at the moment.”

The statement also emphasized that how businesses and consumers react to these shifts, as well as future policy moves, will play a critical role in determining their influence on domestic inflation.

"On the one hand, increases in global trade tariffs could mean that inflation is lower than expected if it means some countries lower the prices of the goods they sell to the UK. On the other hand, inflation could also be higher than expected, for example, if companies have to change where and how they supply goods, and their costs go up in the process," the bank further explained.

Recent economic data indicates that annual inflation in the UK eased to 2.6 percent in March, a slight decline from 2.8 percent in February and marginally below analysts’ projections.

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