In a move to support the economy, the Bank of England has lowered its base interest rate to 4%. However, rising food costs threaten to push inflation higher again, tempering any optimism.
The decision, passed by a slim 5-4 margin, is the latest sign that the UK’s economic recovery remains fragile. For the first time ever, two rounds of voting were needed.
Bailey warned that food inflation is a major concern, with prices expected to surge 5.5% before year-end. Environmental issues, wage hikes, and packaging regulations are all adding pressure.
These inflationary forces could limit the Bank’s ability to lower rates further. Many businesses are already passing new expenses directly to customers, raising the cost of everyday items.
The Chancellor praised the cut, but economists point out that her tax policies may be fueling inflation, leaving the Bank to clean up the mess with limited tools.