BOE Cuts Rates as UK Faces Stagflation Storm

The Bank of England delivered its third consecutive rate cut, lowering rates to 4.5% amid growing stagflation concerns. In a surprising split decision, two of nine committee members voted for a more aggressive 0.50% cut.

The move came alongside a dramatic revision to economic forecasts, with 2024 growth expectations halved to 0.75% while inflation projections were raised to 3.7% due to energy costs. The grim outlook presents a significant challenge for UK Chancellor Rachel Reeves, with the economy having contracted 0.1% in Q4 2023 and expected to grow just 0.1% in Q1 2025.

Markets responded decisively, with the pound dropping 1.2% to $1.2361 and traders pricing in three more rate cuts this year, despite the BOE’s emphasis on a “gradual and careful approach” to future easing.