BOE cuts bank rate by 25 bps to 5.00% in knife-edge call

• Prior 5.25%
• Bank rate vote 4-0-5 vs 4-0-5 expected (Pill, Mann, Haskel, Greene dissented to keep rates on hold)
• Decision was “finely balanced”
• Domestic inflationary persistence is expected to fade away over the next few years
• There is a risk that inflationary pressures from second-round effects will be more enduring in the medium-term
• Need to be careful not to cut rates too quickly or by too much
• Will ensure bank rate stays restrictive for sufficiently long to return inflation to 2% target sustainably
• Will decide on degree of policy restrictiveness at each meeting
• There is uncertainty about interaction between cutting bank rate and quantitative tightening
• Full statement

This article was written by Justin Low at www.forexlive.com.