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Balancing the UK’s fragile economy against stubborn inflation, the Bank of England has cut interest rates to 4%—but warned that soaring food costs could derail progress.
The MPC’s vote was split 5-4, revealing deep divisions within the Bank. Governor Bailey emphasized a cautious approach ahead, noting uncertainty in the economic landscape.
While government officials praised the rate cut, criticism mounted over tax hikes and wage mandates that could be fueling inflation. Investors responded with cautious optimism.
Food inflation is forecasted to surge to 5.5%, driven by climate impacts on agriculture and rising domestic costs. That mix of global and local pressures is making monetary policy harder to navigate.