Bank of England cuts interest rates by 25 bps to 4%

The MPC “remains focused on squeezing out any existing or emerging persistent inflationary pressures, to return inflation sustainably to its 2-per cent target in the medium term,” the central bank said in a statement.

“There has been substantial disinflation over the past two and a half years, following previous external shocks, supported by the restrictive stance of monetary policy. That progress has allowed for reductions in Bank Rate over the past year,” it noted.

Consumer price index-based inflation is forecast to increase slightly further to peak at 4 per cent in September. Inflation is expected to fall back thereafter towards the 2 per cent target, although the MPC remains alert to the risk that this temporary increase in inflation could put additional upward pressure on the wage and price-setting process.

Overall, the MPC judged that the upside risks around medium-term inflationary pressures have moved slightly higher since May, the statement noted.

The timing and pace of future reductions in the restrictiveness of policy will depend on the extent to which underlying disinflationary pressures continue to ease, the central bank added.

ALCHEMPro News Desk (DS)