The Bank of England (BoE) has lowered its interest rates by 0.25%, bringing the benchmark rate from 5.25% to 5.0%. This is the first rate cut since the start of COVID-19 in March 2020 and the decision was reached through a close vote in a 5-4 margin.
During the press release, BOE’s Governor, Andrew Bailey emphasized the importance of maintaining a low and stable inflation and cautioned against rapid or excessive rate cuts.Â
“While we’ve managed to cut interest rates today, We need to make sure make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much,”
Andrew Bailey Stated
This report comes after the US Federal Reserve decided not to change its interest rates which were pegged at 5.25%. But Jerome Powell, the Chairman of the Federal Reserve hinted at a possible rate cut in September thereby indicating that other central banks may follow suit
In contrast to this, Japan’s Central Bank has raised its interest rates due to the weakening Japanese Yen while central banks from Canada and other countries had already slashed their own rates earlier this year
The decision made by BoE will contribute towards assisting the UK’s economic growth hence benefiting sectors such as real estate and homebuilding, as shown by the rise in the FTSE indices after the announcement.
Following the report the British Pound dropped against the US dollar hitting its lowest level since early July and bond yields fell alongside it as well with the 10-year gilt yield reaching its lowest point since March
Both crypto and traditional investors are now looking forward to seeing if BoE will make more cuts as reports like this can affect their portfolios. While, there are no immediate cuts promised it is likely that before the end of this year, there might be one more cut with a 55% probability in September’s next meeting.
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