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BoE cuts rates amid economic uncertainty

The Bank of England (BoE) has joined the group of central banks cutting rates, a day after the US Federal Reserve moved to increase its rate.

It was the BoE’s first interest rate cut in more than four years, reducing its key rate from 5.25% to 5%.

The move caused the London stock market to drop 1%, with even larger falls across Europe and the US following the decision.

Bank stocks were hit, but on Wall Street, a very weak reading on the health of the country’s manufacturing sector and a sharp rise in initial jobless claims contributed to the Dow’s largest fall of 2024 so far.

While several analysts had predicted the BoE would announce an interest rate reduction at its latest meeting, the lack of a clear signal from the central bank had increased uncertainty in some market sectors.

The bank’s Bank Rate had been held at a 16-year high of 5.25% since August 2023.

The BoE typically provides less forward guidance than other central banks, but Thursday’s decision was particularly close (a five to four vote for a cut) given the recent six-week period when its communications were restricted due to Britain’s general election.

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