Bank of England cuts rates while Fed holds steady

The Bank of England cut interest rates last week, bringing them down from a 16-year high. The narrow vote in favour of a cut (5-4) saw rates lowered by 25 basis points to 5%.

“We need to make sure make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much,” Governor Andrew Bailey said in a statement.

The UK’s consumer price inflation returned to the central bank’s 2% target in May and remained there in June. It hit a more-than-40-year high of 11.1% in October 2022.

The country’s interest rates had remained unchanged for almost a year, and the minutes of the latest meeting show that the decision to cut this time around had been “finely balanced” for some members.

Meanwhile, the US Federal Reserve voted to keep its benchmark interest rate steady in the 5.25-5.5% range. However, its chair, Jerome Powell, said rates could be cut as soon as September if the US economy follows its expected path.

“If we were to see inflation moving down … more or less in line with expectations, growth remains reasonably strong, and the labor market remains consistent with current conditions, then I think a rate cut could be on the table at the September meeting,” he said.