Investing.com - The Bank of England cut interest rates from a 16-year high Thursday, the first reduction since the pandemic as policymakers judged inflation sufficiently tamed to provide the economy with a boost.
Policymakers voted 5 to 4 to cut the Bank Rate by 25 basis points to 5.0%, after U.K. consumer price inflation returned to the BOE's 2% target in May and stayed there in June, falling from the 41-year high of 11.1% seen in October 2022.
There had been a great deal of uncertainty surrounding this meeting as key policymakers had not spoken publicly for more than two months in the run-up to the country’s general election in early July.
Additionally, data released earlier Thursday showed that British factories recorded their best month for two years during July, with the S&P Global UK Manufacturing Purchasing Managers' Index rising to 52.1 from 50.9, its highest reading since July 2022.
Output and new orders increased at the fastest rate since February 2022, while manufacturers added staff for the first time in 22 months.
Bank of England Chief Economist Huw Pill said last month that it was an open question whether the BoE would cut interest rates at the August meeting, as underlying price pressures showed "uncomfortable strength."
The Bank will publish its quarterly Monetary Policy Report alongside the rate announcement and hold a press conference.
“We expect the updated BoE projections to show higher near-term growth projections, while continuing to show inflation dipping below 2% in 2026, thus signalling that rates will possibly need to be cut more than currently priced by the markets,” analysts at UBS said, in a note.