Bank of England expected to cut key UK interest rate to 4.50pc

LONDON, Feb 06 (AP): The Bank of England (BoE) is widely expected to cut interest rates for the third time in six months later Thursday, even though inflation remains above its target.

Most economists think the nine-member Monetary Policy Committee will lower the bank's main interest rate by a quarter of a per centage point to 4.50per cent, taking it to its lowest level since mid-2023. The base rate helps dictate how expensive it is for individuals to take out a mortgage or a loan, while also influencing the returns offered by banks on savings.

Of particular interest to financial markets is what the bank's accompanying economic forecasts show and the tone of Gov. Andrew Bailey in his ensuing press briefing.

"Until now, the bank has cut at alternate meetings, but a stagnating economy and declining employment argue for more urgent action," said Andrew Wishart, senior UK economist at Berenberg Bank.

The rate-setting panel is tasked with ensuring that inflation, as measured by the consumer prices index, hits a 2per cent target over the coming couple years or so.

Though inflation is standing at 2.5per cent and expected to rise in coming months, partly as a result of business tax increases from the new Labour government, most economists think it will then trend lower towards the target, hence the panel's ability to cut.

Official figures earlier this month showed a surprise decline in the inflation rate to 2.5per cent in the year to December, largely as a result of easing price pressures in the services sector, which accounts for around 80per cent of the UK economy.