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Investing.com - The Bank of England cut its benchmark interest rate Thursday, as widely expected, in order to support a creaking jobs market, but the outlook for more monetary policy easing looks cloudy.
The U.K. central bank cut its Bank Rate by 25 basis points to 4%, from 4.25%, its fifth reduction in 12 months.
The rate cut comes as the U.K. economy retreats and amid concerns that a more worrisome deterioration in the jobs market is imminent.
“Slack is undoubtedly building,” said analysts at ING, in a note. “Payrolled employee numbers have fallen in seven out of the past eight months. The unemployment rate has risen by a few tenths of a percentage point this year (and crucially, unlike in recent years, the data looks more reliable). Vacancy data from Indeed suggests the UK jobs market has cooled further than in other major economies.”
That said, the choice to cut interest rates was by no means unanimous, with four members of the nine-strong Monetary Policy Committee voting for no cut at all due to their inflation concerns.
This split reflected the conflicting pressures on Britain’s central bank, as the U.K. economy contracted for the second quarter in a row in May, yet inflation is running above the BoE’s projections and forecast by some economists to reach 4% in coming months, double the central bank’s target.
Investors are mostly pricing in another cut in November after today’s reduction but only one or two more reductions in 2026, which would leave Bank Rate at 3.5% or 3.25%, higher than the eurozone’s benchmark rate of 2%.