Rates Fall to 4%, But UK Braces for Inflationary Bounce

The Bank of England has reduced its base interest rate to 4%, marking another move to stimulate a struggling economy. Yet the central bank’s tone was far from upbeat.
In a 5-4 vote, the MPC approved the rate cut while cautioning that food prices are set to rise sharply, possibly pushing inflation to 4%. Supply chain issues and domestic policy shifts are adding fuel to the fire.
Governor Bailey emphasized the uncertainty ahead, warning that any future rate cuts must be gradual and carefully timed. Investors responded by pushing the pound higher amid mixed expectations.
Supermarkets are facing rising costs, from new wage laws to packaging fees. These pressures are being passed on to shoppers, with food inflation expected to peak at 5.5%.
The government’s celebration of the rate cut was met with skepticism. Observers suggest that recent fiscal measures may be driving inflation, not reducing it.