Interest rate cut and slower inflation offer Britons a break

The British economy ended the year with a moment of respite.

- ESHE NELSON

Policymakers at the Bank of England cut interest rates Thursday a quarter-point, to 3.75%, after inflation had slowed more than economists expected.

The central bank had held rates steady at its two previous meetings because of concerns about stubbornly high inflation. Data published Wednesday eased those fears, in particular for Andrew Bailey, the governor of the bank. Consumer prices rose 3.2% in November, versus the same time last year, down from 3.6% the previous month.

"We've passed the recent peak in inflation and it has continued to fall, so we have cut interest rates for the sixth time” in the past year and a half, Mr Bailey said in a statement.

For months, the nine-person rate-setting committee at the Bank of England has been almost equally divided into two camps. One group has been concerned about weakening demand in the economy and troubled by signals of low confidence, such as households’ high savings rates. The other group has been worried that the recent bout of high inflation has changed the way consumers and businesses think about prices, potentially embedding higher inflationary expectations in their behaviour.

Mr Bailey has served as the swing vote recently. This week, he broke the deadlock again and cast one of the five votes in favour of cutting rates, versus four for leaving them unchanged.