The Bank of England has made a fifth consecutive rate cut, bringing the base interest rate to 4%. Yet with inflation forecast to rise again, the expected relief may be short-lived.
This decision came after the most divided vote in recent memory—5-4 in favor of a cut. Bailey said inflationary risks, especially from food, have risen since the last update in May.
The Bank cited both global and local contributors to inflation. Weather-hit harvests, wage increases, and packaging mandates are expected to push food prices up significantly.
The inflation rate stood at 3.6% in June, but the Bank now expects it to climb toward 4% due to food prices alone. Supermarkets are already passing these costs to consumers.
Though the government hailed the cut as a sign of economic resilience, analysts argue that fiscal policy is partly to blame for the rising prices, slowing the recovery the cut was meant to support.
Bank Cuts Rates, But Inflation Forecast Dims Hopes for Quick Recovery
