London, Aug 1 (EFE).- The Bank of England on Thursday lowered interest rates for the first time in more than four years, from 5.25% to 5%, considering that inflation in the United Kingdom, currently at 2%, has stabilized.
The monetary policy committee of the institution decided by a majority of 5 to 4 votes to reduce the rate, which was at its highest level in 16 years, having been climbing since the pandemic.
This is the first rate cut implemented by the bank since it lowered rates to a record low of 0.10% on 19 March 2020 to deal with the impact of the health crisis.
The reference rate was set at 5.25% from August 2023, a level not seen in this country since February 2008.
After 2008, rates fell during the global credit crisis, reaching a low of 0.10% in March 2020 due to the Covid pandemic.
The central bank then gradually raised the rate again from December 2021 to combat inflation, which soared in the wake of the war in Ukraine in February 2022 to reach a 40-year high of 11.1% in October of that year.
Explaining its decision to begin lowering rates, something already expected by the market, the institution said on Thursday that “the impact of previous external shocks has been attenuated and some progress has been made in moderating the risks of persistent inflation.”
Although the consumer price index (CPI) remained within the official target of 2% in May and June, the bank expects a slight rebound in the second half of the year, and warns that “monetary policy will have to remain restrictive for a sufficient period of time.”
The committee “will decide the appropriate degree of restriction at each meeting,” with the next one on Sept. 19, it said in a statement.
The British economy returned to growth in the first quarter of this year, expanding by 0.7%, after having registered a technical recession by registering two consecutive quarters of contraction at the end of 2023, with a GDP decline of 0.1% between July and September and 0.3% from October to December.
Following the announcement of the cut in the price of money, the new Minister of the Economy, the Labour Party’s Rachel Reeves, said that “although it is good news, millions of families continue to face higher mortgage rates” due, she pointed out, to the management of the previous Government.
“That’s why this Government is taking tough decisions to fix the foundations of our economy after years of low growth, so that we can rebuild the UK and improve the situation across the country,” he said.
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