Reeves will need to pull a bigger rabbit out of her hat

Spectre of stagflation looms as Bank of England delivers longed-for interest rate cut but halves its growth prediction

- JAMES MOORE

Businesses, borrowers and especially Rachel Reeves breathed a sigh of relief yesterday when the Bank of England delivered its widely expected interest rate cut.

Base rates have fallen from 4.75 per cent to 4.5 per cent – which is still quite restrictive, especially when you consider the thick mud the UK economy is currently slogging through.

There wasn’t much else to celebrate in the accompanying release from the Bank’s rate-setting Monetary Policy Committee (MPC), which made liberal use of red ink in updating its forecasts, which included cutting its 2025 growth expectation in half, to 0.75 per cent, from 1.5 per cent previously.

The Bank is clearly worried, and it was notable that two MPC members voted for a larger, half-point cut. That one of them was leading interest rate dove Swati Dhingra, who has consistently argued that UK plc needs lower rates, came as no surprise – but the identity of the other, the hawkish Catherine Mann, was a real eye-opener, especially considering the second big nasty in the Bank’s minutes and accompanying report.