BOE Interest Rate: The Bank of England (BoE) has reduced its key interest rate to 4.75%, marking the second rate cut of the year. This follows a significant drop in UK inflation, which has now fallen below the Bank’s 2% target for the first time in three years. The decision comes after a similar quarter-point rate cut in August and is part of the Bank’s ongoing efforts to control inflation and stimulate economic growth.

The Bank’s Monetary Policy Committee (MPC) voted to lower the base rate from 5% to 4.75% in a move that is expected to benefit homeowners and businesses alike. For homeowners with a 75% loan-to-value (LTV) ratio, the 0.25% reduction could result in a monthly saving of £32 or £384 annually. With the August cut factored in, the total annual saving could reach £756. For first-time buyers, the rate cut brings much-needed relief in the housing market. (Bank Of England Interest Rate)

Alastair Douglas, CEO of TotallyMoney, commented on the rate cut, saying, “While the days of 1-2% mortgages may feel like a distant memory, the Bank of England’s rate cut will feel like good news to many.” The cut is also expected to stimulate borrowing, providing a boost to consumer spending and business investment.

However, the recent increase in government spending, following Chancellor Rachel Reeves’ announcement of £70bn in additional annual expenditure, could potentially add inflationary pressures. The Office for Budget Responsibility (OBR) has warned that higher public spending might lead to a rise in inflation, complicating the Bank’s decision-making process for future rate cuts. Economists are now divided on whether the BoE will continue to ease rates or hold steady as it monitors the economic impact of the government’s fiscal policies.

Despite the uncertainty, the Bank has indicated that further rate cuts may be in store. Governor Andrew Bailey previously signaled that inflation control measures would allow the MPC to be more aggressive with rate reductions. The next MPC meeting is scheduled for December, and the Bank will continue to assess the economic outlook before making further decisions.

This rate cut comes as part of a broader global trend, with the US Federal Reserve also expected to announce a quarter-point rate cut later this week. The move by both central banks reflects ongoing efforts to stimulate growth and manage inflation in an unpredictable global economic climate.