Rate cut welcome but don't bank on any more this year

The BoE has reduced interest rate to 5% but with inflation likely to edge up, more cuts are unlikely, says James Moore

-  James Moore

For the first time in more than four years, the Bank of England has cut interest rates – a rare piece of good news. Savers won’t be happy, but they have had plenty of time in the sun of late.

Cheers rang out in the City of London and across Britain’s business community, which has been involved in a sisyphean struggle with high financing costs. These have eaten away at margins, compromised growth and held back the stuttering economy.

Yes, this was only a quarter point cut – but given how long the economy has been suffering under base rates of 5.25 per cent, any relief is sweet. “This rate cut was desperately needed, and small firms will give it a warm welcome as a harbinger of more cuts yet to come,” said Martin McTague, the chair of the Federation of Small Businesses, whose members have been at the sharp end of this.

Many have faced a desperate struggle to find the credit they need to finance their businesses, or at least credit that they can reasonably afford. “A brave new world,” said the Wealth Club investment service. “Whisper it quietly, but an economic revival appears to be gathering pace,” said Jonathan Moyes, its head of investment research.