Bank of England's Rate Cut Sparks Debate Amid Inflation Concerns

The Bank of England has cut interest rates from 4.25% to 4% as domestic price and wage pressures ease, despite inflation worries. Four out of nine policymakers voted against the cut, underscoring concerns over high inflation.

Governor Andrew Bailey emphasized the complexity of the economic situation, asserting that temporary factors would prevent a sustained rise in headline inflation, and stressed the necessity for cautious rate cuts. He also noted that food and energy prices could heighten inflation expectations.

Bailey confirmed the rate path is downward but acknowledged increased uncertainty in its trajectory. While business investment decisions are delayed due to market unpredictability, he dismissed recession fears as influencing his vote. Deputy Governor Dave Ramsden mentioned that the neutral interest rate is within 2% to 4%, reflecting varied views among policymakers.

(With inputs from agencies.)