Buses in London's financial province pass outside the royal stock exchange near the Bank of England on July 2, 2021 in London, the United Kingdom.
Mike Kemp In photos Gety pictures
The Bank of England reduced the first interest rate in 2025 on Thursday, and resumed cash dilution amid continuous concerns about slow growth in the British economy.
The central bank reduced the standard interest rate by 25 basis points to 4.5 %, with the majority of seven members from the nine monetary policy committee voted in favor.
Economists were widely expecting the central bank to cut interest rates, following a set of dull growth data in the United Kingdom.
Economy FlatAccording to the data released in December, while reading the latest monthly domestic GDP reading showed that the economy expanded only 0.1 % in November, after its reduction by 0.1 % in October. Last month, weak retail data also added to expectations that England would reduce prices.
At the same time, at the same time, at the same time, It decreased to 2.5 % of the expected in December, with more basic prices growing – It also provides expectations that central bank policy makers will go towards the first pieces in 2025. The goal of inflation in the central bank is 2 %.
The Bank of England said In a statement There has been “great progress in inflation over the past two years, as previous external shocks have declined.”
However, he stressed that “the gradual and accurate approach to further withdrawal of monetary policy restrictions is appropriate.”
The members of the England Monetary Policy Committee must now judge how to balance the need to enhance growth with the inflationary risks posed by an emerging commercial war, as US President Donald Trump began to impose a tariff on the closest commercial partners in America He threatened to apply the same measures to the European Union and the United Kingdom
The bank's monetary policy committee said it expects to organize GDP growth from the middle of this year, but he said that “he will continue to monitor the risks of continuing inflation and what advanced evidence may reveal about the balance between the total and the demand for an economy.”
She concluded that “monetary policy will need to continue to restrict long enough in order to dispel the risk of inflation sustainable to a more than 2 % goal in the medium term.”
In response to the interest rate of the Bank of England, the UK advisor Rachel Reeves said in a statement that the reduction in the interest rate of England was “welcome news”, but she said it “is still not satisfied with the growth rate.”
The consultant claimed that the treasury plans “for the economic growth suit” will work to “put more money in the pockets of workers” and said that the government is committed to “confronting the blockers to make the construction of Britain again, increasing unnecessary organizational barriers and investing in our country to rebuild roads, railways and infrastructure Vitality.
What comes after that?
Economists are This week.
He said in the comments via e -mail: “The decisive question facing politicians is whether they will indicate that there is another definitely that can come as soon as they March or will remain in the training course last year – with price cuts at one pace per quarter?” Monday.
He said that the main issue of Peel Hunt is that the Bank of England will maintain one pace for each quarter and that the bank will wait until the May meeting before follow -up with a second trim this year.
“However, the risks tend to policy makers, indicating a willingness to interact more strongly with economic weakness – and thus hint to another reduction once the March 20 meeting already,” Beckering said.
Andrew Wesart, UK's chief economist in Bernberg, indicated that the central bank may see the need to relax in monetary policy more quickly.
“Until now, the Bank of England has reduced alternative meetings, but the stagnant economy and the decline in work argues in a more urgent measure,” he said in the Monday memo.
“The central bank has ruled that the labor market is widely at the December 18 meeting, before the salary statements for December revealed more losses in jobs. This basis, it is reasonable that interest rates will drop more in employment.”
The first trim this year comes after a few difficult months of Rves, who has faced continuous pressure since the treasury was unveiled Financial plans Last fall, the tax burden is to be increased on British companies. The package has attracted widespread criticism from industrial leaders on the potential impact of investment, jobs and economic growth.
Reeves defended the plans, saying that difficult measures were necessary to achieve economic stability and that there is “no alternative.” She also said that the tax increase on companies will serve as one time, telling the British Industry Union last November that it “does not return more borrowing or taxes more.”
Some economists believe that the central bank can take a more gradual approach given the inflationary risks posed by the potential Trump tariff, and Financial position UK government has taken.
“Despite the recent weak news about activity and uncertainty about global expectations due to the Trump import tariff, the strongest news about local prices means that the Bank of England may only continue to reduce interest rates,” at Capital Economics, said in a Wednesday note.
But while the consumer price index enlarges it may revive from 2.5 % in December last year to about 3.0 % later this year, we believe that the decline to less than 2.0 % in the next year will reduce interest rates … To 3.50 % by early 2026, instead of 3.75-4.00 % as investors expect, “note.
