Interest rate cut to 5%

UK interest rates have been cut for the first time in more than four years, releasing some pressure on borrowers as the Bank of England was encouraged by signs that inflation has slowed.

The Bank reduced rates from 5.25% to 5%, following a split vote which saw some members of the Monetary Policy Committee (MPC) prefer to keep the level unchanged.

Governor Andrew Bailey, who voted for a cut, said “inflationary pressures have eased enough that we’ve been able to cut interest rates today”.

But he signalled the central bank was going to be careful not to cut rates too quickly going forward.

Borrowing costs had been held at 5.25% – the highest level in 16 years – since August last year.

Yesterday’s decision marks a turning point for the Bank, which has not implemented a rate cut since the onset of the Covid-19 pandemic in 2020.