Bank of England slashes key rates to 4% from 4.25%

The Bank of England cut interest rates on Thursday but four of its nine policymakers - worried about high inflation - sought to keep borrowing costs on hold, suggesting the BoE’s run of rate cuts might be nearing an end.

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Difficulty reaching an agreement meant the Monetary Policy Committee held two votes for the first time in its history.

With the MPC facing the conflicting risks posed by an inflation rate that the BoE forecasts will soon be double its 2% target and a worsening of job losses, Governor Andrew Bailey and four colleagues backed lowering Bank Rate to 4% from 4.25%.

But that was only after a first round of voting ended in a 4-4-1 split, with external MPC member Alan Taylor initially backing a half-point cut.

"It remains important that we do not cut Bank Rate too quickly or by too much," Bailey told a press conference after the decision, highlighting that Britain's central bank still expected recent higher levels of inflation to be short-lived.

"We stand ready to adjust our course if we see shifts in the balance of risk to the medium term outlook for inflation." The four members of the MPC who backed keeping rates on hold included Clare Lombardelli, the deputy governor for monetary policy, who broke from the majority for the first time. Chief Economist Huw Pill also voted to keep Bank Rate at 4.25%.

British government bond yields rose and stocks fell after the announcement. Sterling jumped by about half a cent against the US dollar.