The Bank of England is under fire for not going far enough in its cut to interest rates due to the “economy being on its knees”, analysts have claimed.
Earlier this week, the central bank slashed the base rate by 0.25 percentage points to 4.25 per cent, marking its fourth reduction since beginning to lower rates last August.
The Bank of England is under fire
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The MPC has emphasised that “monetary policy is not on a pre-set path” and will remain responsive to economic uncertainties.
Despite inflation falling from 2.8 per cent in February to 2.6 per cent in March, the committee warned of potential increases ahead.
Specifically, the MPC cautioned that rising energy prices are likely to push CPI inflation up from April onwards under current projections.
Inflation could reach as high as 3.5 per cent during the third quarter of this year, according to the MPC’s forecast, before declining later in 2025.
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Rachel Reeves’s decisions have drawn scorn from pub landlordsParliament TVDaniel Casali, chief investment strategist at Evelyn Partners, commented on the announcement, noting that despite a more disinflationary macro picture, the BoE appears committed to a gradual pace of cuts.
“MPC members will be wary of cutting interest rates too quickly, with three issues in mind,” he said. These concerns include uncertainty about US trade tariffs’ impact on inflation, uncomfortably high nominal weekly earnings at 5.6 per cent year-on-year, and rising household inflation expectations.
Casali expects the MPC to “stick to gradual and careful guidance” with quarterly cuts, as “the risk of policy error remains high.”
He added that gradually lower rates should provide “some insurance against downside risks to the economy and UK domestic stocks”.
Professor Joe Nellis, economic adviser at MHA, criticised the Bank’s cautious approach, arguing it “should have been bolder” with a double cut to four per cent.
“Even with a major announcement this afternoon on UK/US trade tariffs to add to the India deal earlier this week we don’t see any changes in the overall downward trajectory,” he stated.
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Full list of base rate changes from the Bank of England over the last two years CHAT GPT Nellis highlighted that despite inflation concerns, growth appears to be the Bank’s priority.
He pointed to the European Central Bank’s more aggressive strategy, with interest rates now at 2.25 per cent, suggesting the Chancellor “could certainly do with our own Central Bank being much bolder”.
The Bank of England’s next base rate decision is scheduled for June 19, when markets will be watching closely for signs of further easing.
