Bank of England cuts key rate by 25 basis points

By Tuba Ongun

The Bank of England (BoE) on Thursday cut the bank rate by 25 basis point from 16-year high to 5%, as widely expected.

"It is now appropriate to reduce slightly the degree of policy restrictiveness," the BoE said in a statement following its meeting on July 31.

Highlighting that the annual consumer inflation rate in the UK was at the bank's target of 2% in both June and May, it said the figure is expected to increase to 2.75% in the second half of 2024.

"Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further," it said.

The bank forecast inflation to fall back to 1.7% in two years’ time and to 1.5% in three years.