Bank Of England Keeps Interest Rates At 4.25% But Possible Cuts To Come

The Bank of England has left interest rates on hold at 4.25%, but has indicated that cuts in the cost of borrowing may follow later this year after “clearer evidence” of rising unemployment and a slowing economy.

Six members of the Bank’s nine-member monetary policy committee (MPC) voted to keep rates on hold while three supported a reduction to 4%, to add to the four quarter-point cuts since last August.

The Bank’s governor, Andrew Bailey, said interest rates “remain on a gradual downward path” after “seeing signs of softening in the labour market”. He cautioned, however, that the world was “highly unpredictable” and it was difficult to predict when interest rates would next be reduced.

Tina McKenzie, Policy Chair, Federation of Small Businesses (FSB) said:
“Today’s decision on the base rate was not unexpected, given recent inflation readings being higher than the Bank of England’s target.

“However, small firms will be hoping to see cuts later in the year, in order to improve their access to funding. Over four times as many small firms rated the availability of new credit as poor than rated it as good, according to FSB’s most recent Small Business Index

“High interest rates also unfortunately translate to worse problems with late payment, as large corporates which are feeling pressure from their own leveraged positions use their suppliers as a source of, essentially, free credit.

“The forthcoming Industrial Strategy should follow on from the Government’s welcome plan to tackle late payment by banning large firms with poor payment practices from applying for grants.

“Meanwhile, the plans for audit committees and boards of large businesses to oversee and review payment practices, to improve transparency and accountability, cannot be brought in soon enough.