Bank of England cuts interest rates as inflation stays low

LONDON (ICIS)–The Bank of England (BoE) on Thursday cut its key interest rate for the second time this year, instituting a 25 basis point fall as inflation continues below target.

The bank cut its core interest rate to 4.75% in the wake of a steeper-than-expected decline in inflation in September, from 2.2% to 1.7%.

Eurozone inflation also declined that month, dropping to 1.7%, but is expected to have increased last month, bouncing back to 2% according to preliminary Eurostat data, driven by higher food and services pricing and weaker energy cost declines.

Both the BoE and the European Central Bank have inflation targets of levels close to but not exceeding 2%.

The BoE move also follows the announcement of the UK’s autumn budget, which pledged higher borrowing, taxes and spending to generate funds for areas such as the country’s health service.

The UK Office for Budget Responsibility (OBR) projects that the budget will drive inflation higher in the short term, to a quarterly peak of 2.7% in mid-2025.