IoD press release MPC vote by surprisingly narrow 5-4 to cut rates
Commenting on the decision by the Monetary Policy Committee of the Bank of England to reduce interest rates to 4.25%, Anna Leach, Chief Economist of the Institute of Directors, said:
“The MPC voted 5-4 to cut rates today, in a surprisingly close vote by the MPC. Two members voted for a larger 50 basis point cut, but two voted to hold rates. It is clear from the minutes that the MPC are caught between concern over higher inflation becoming embedded in expectations and downside risks to growth from global developments.
“Regarding the impact of tariffs, as would be expected, the Bank judge that developments to-date push down on both the growth and inflation forecast in the UK via a variety of channels, including uncertainty and lower global export prices. Meanwhile, the Bank’s forecasts incorporate lower expected prices for oil and gas, and a higher sterling exchange rate, which all feed through directly to lower price pressures.
“While the Bank takes pains to emphasise that interest rates are not on a pre-set path, their central forecast has a further 50 basis points of cuts this year and a lower profile for inflation. Today’s split vote underlines the degree of uncertainty facing policymakers and re-emphasises the importance for the UK of reinforcing and amplifying its global relationships.”
