Interest rates remain unchanged by the Bank of England, persisting high inflation rates.
The Bank of England (BoE) has made a decision widely expected by markets, following a policy meeting in August, to lower borrowing costs to the lowest level in two years. This move is aimed at boosting the UK economy, which has been threatened by US tariffs.
Similarly, the Bank of Canada opted to trim borrowing costs this week, citing concerns over the impact of US President Donald Trump's tariffs. Meanwhile, Norway's central bank reduced interest rates to four percent.
The BoE's decision came a day after the US Federal Reserve cut its benchmark borrowing costs for the first time in 2025. This move is part of a global trend as central banks attempt to stimulate economic growth amidst increasing trade tensions and rising inflation.
According to Linsday James, investment strategist at wealth management firm Quilter, markets are not fully pricing the next rate cut until the end of April. This suggests that further interest rate reductions may be on the horizon.
However, the BoE is balancing rising inflation against a sluggish economy and unemployment at a four-year high. UK annual inflation was at 3.8 percent in August, and the BoE confirmed it will peak at four percent in September.
The Labour government, which raised taxes and slashed public spending in August 2022 under Prime Minister Liz Truss's government, has acknowledged difficulty in driving economic growth. The pressure on Prime Minister Keir Starmer increases ahead of the annual budget announcement in late November.
Bank of England governor Andrew Bailey stated that inflation is expected to return to the two-percent target, but the economy is not yet out of the woods. The BoE's lower borrowing costs are a step towards reviving the UK economy, but the road to recovery may still be long and challenging.
In conclusion, central banks around the world are taking measures to stimulate economic growth by lowering interest rates. The BoE's decision to lower borrowing costs is part of this global trend, aimed at boosting the UK economy amidst trade tensions and rising inflation. However, the road to recovery is not yet clear, and further interest rate reductions may be needed.
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