The Bank of England Monetary Policy Committee (MPC) has voted to cut interest rates to 4.0%.

The MPC voted 5 to 4 in favour of the move, with the dissenting members preferring to leave rates unchanged at 4.25%.

The cut was in line with market expectations.
Nicholas Hyett, Investment Manager at Wealth Club said:

“The Bank’s Monetary Policy Committee has launched a pre-emptive strike on any economic downturn later in the year. It remains unsaid in these minutes, but the increasing likelihood of tax hikes and/or spending cuts at the Autumn Budget has also probably played a part in this “finely balanced” decision. Both consumers and companies could see their pockets squeezed by the taxman, and that would have knock-on effects for economic growth.

While inflation is expected to rise a bit in September, the Bank believes it will fall back towards the 2% target from there. That’s opened up the space for today’s pre-emptive action. The market seems to be suggesting there could be another cut later this year – and with one member of the MPC already arguing in favour of a move to 3.75% you can see why.

It feels like we’re entering a wait and see phase. Does this rate cut give the economy a little bit of extra umph it badly needs, or will the Bank need to act again come the Budget? Time will tell.”