The Bank of England has cut interest rates by 25 basis points, with some members advocating for a steeper, 50 bps reduction due to a worsening stagflation outlook for the UK economy. Growth is expected to reach only 0.75% by 2025, while inflation is predicted to peak at 3.7% this year. This report casts a critical light on the fiscal policies of Chancellor Reeves, and may amplify calls for her resignation. The shift in voting stance by traditionally hawkish member Catherine Mann raises concerns about future growth prospects amid rising inflation expectations.
The Bank of England has cut rates by 25bps, with two voting for a larger 50bps move, as policymakers contemplate an increasingly stagflationary outlook for the British economy.
Growth has been revised down, to only 0.75% in 2025, and inflation has been revised up, with a peak of 3.7% expected this year.
The biggest surprise of all is that Catherine Mann - the arch-hawk that everyone had expected to vote for a hold - voted for a 50bps move.
The fact that inflation is expected to rise closer to 4% than to 2% this year is a clear signal that confidence about the subsidence of underlying pressures has increased quite markedly.
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