Bank of England cuts interest rate to 4% in split decision

The Bank of England cut the interest rate by 25 basis points to 4% on Thursday as the central bank resumed what it describes as a “gradual and careful” approach to monetary easing.

The BOE was widely expected to trim rates by 25 bps at its latest monetary policy meeting, but traders and economists were keen to see the breakdown of support for the decision among the bank’s policymakers.

As it turned out on Thursday, the nine-member MPC voted by a majority of 5-4 to reduce the key interest rate—the “Bank Rate”—by 25 bps rather than keeping it on hold, according to a foreign news wire service.

The British pound rose 0.5% against the dollar after the decision, to $1.3424.

Policymakers have had to weigh up sticky inflation—the consumer price index (CPI) rose to a hotter-than-expected 3.6% in June from 3.4% in May—with a cooling jobs market and lackluster growth. The U.K.’s gross domestic product contracted 0.1% month-on-month in May.

In a statement Thursday, the bank said the MPC “remains focused on squeezing out any existing or emerging persistent inflationary pressures, to return inflation sustainably to its 2% target in the medium term”.

The MPC was initially split on reducing or holding interest rates with four members wanting to hold rates, four others voting to cut and one policymaker voting for a larger 50-basis-point cut. The committee then held a second round of voting to arrive at a majority decision to cut rates by 25 bps.