Economy News – Follow-up
In a move consistent with market expectations, the Bank of England has implemented a 25 basis point reduction in its interest rate during its first meeting of 2025. This decision was supported by a majority of the Monetary Policy Committee, with 7 out of 9 members voting in favor.
As a result of this decision, the interest rate has been lowered to 4.5%. The Bank’s statement highlighted its commitment to maintaining this reduced interest rate for an extended duration to guide inflation back to its target level of 2%.
The UK economy exhibited no growth in the third quarter, but the Gross Domestic Product (GDP) did show a slight increase of 0.1% in November, after remaining stagnant at the same rate in October.
In December, inflation in the UK decelerated to 2.5%, compared to a 2.6% rate recorded in November, suggesting a cooling of core price growth.
The Bank of England remains focused on its targeted inflation rate of 2%. However, it has indicated that inflation levels are likely to remain above this target for a longer period than initially anticipated in November.
Consequently, the Bank revised its inflation expectations upward for the next two years to 2.3%, up from the prior estimate of 2.2% in November, while the one-year outlook rose by 0.3% to 3%.
In its statement, the Bank also addressed the implications of ongoing trade tensions, particularly emphasizing its close monitoring of American economic indicators and the potentially adverse effects of increased protectionism on the global economy.
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