The Bank of England has cut interest rates for a fifth time in a year amid mounting concern about the strength of the economy.
The Bank’s monetary policy committee voted by a majority to reduce its key base rate from 4.25% to 4%.
Taking borrowing costs to the lowest level since March 2023, the cut was widely expected in financial markets as fears grow over rising unemployment and a weaker growth outlook, despite stubbornly high levels of inflation.
The chancellor, Rachel Reeves, will welcome the decision as Labour comes under heightened pressure over its economic management and speculation over tax rises in her autumn budget, and the cut will ease some of the financial pressure on borrowers.
Ministers have sought to claim credit for the Bank trimming rates since the first reduction in borrowing costs, in August last year, from a peak of 5.25%.
However, critics argue tax rises in Reeves’s first autumn budget have contributed to Britain’s sluggish economic performance, adding to the pressure on businesses facing heightened uncertainty amid Donald Trump’s global tariff war.
Official figures show unemployment has crept higher in recent months, while the economy shrank in April and May. Inflation has risen by more than expected, reaching 3.6% in June – significantly above the Bank’s 2% target.
Business surveys this week have shown a slowdown in the service sector and a collapse in construction output.
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