BoE's MPC maintains neutral interest rate range at 2%-4%, Ramsden says.

Bank of England Deputy Governor Dave Ramsden stated that the Monetary Policy Committee's neutral interest rate range remains between 2% and 4%. MPC members have varying views within this range. The Bank of England recently cut interest rates to 4% from 4.25%.

Title: Bank of England Cuts Interest Rates, Reflecting Economic Uncertainty and Inflation Concerns

The Bank of England (BoE) has reduced its interest rates to 4% from 4.25%, marking the fifth consecutive cut since August 2024. This decision, made by the Monetary Policy Committee (MPC) in a 5-4 vote, reflects the central bank's cautious approach to monetary policy in response to ongoing economic uncertainties and inflationary pressures.

The BoE's latest interest rate cut was widely anticipated, with the central bank opting for a quarter percentage point reduction to 4%. This move aligns with the MPC's neutral interest rate range, which spans between 2% and 4%, as stated by Deputy Governor Dave Ramsden [3]. The decision was influenced by the committee's assessment of the economic landscape, where underlying disinflationary pressures continue to ease, and the need for a gradual and careful withdrawal of monetary policy restraint [2].

The UK's economic growth remains subdued, with the BoE forecasting a 1.25% growth rate for 2025, slightly higher than its previous estimate of 1%. This growth is conditional on a sustained fall in the household saving ratio. The central bank expects GDP growth to pick up to 0.3% in the third quarter of 2025 [2].

The BoE's latest monetary policy report also highlighted concerns about inflation, which is forecast to peak at 4% in September. The report noted that the temporary increase in inflation could put additional upward pressure on the wage and price-setting process [2]. The MPC's neutral interest rate range reflects its judgment that inflationary pressures are still above the 2% target, necessitating a cautious approach to rate cuts.

The FTSE 100 index reacted to the interest rate cut, dropping by 66.56 points or 0.73% to 9,097.75 nearly half an hour past noon. The market's cautious response underscores the ongoing uncertainty surrounding the UK's economic outlook [1]. While some sectors, such as Intercontinental Hotels Group and Coca-Cola HBC, saw positive movements, others, like Hikma Pharmaceuticals and BAE Systems, experienced declines, reflecting the mixed performance of various industries [1].

In conclusion, the BoE's interest rate cut reflects its commitment to a gradual and careful approach to monetary policy, aimed at balancing economic growth and inflation control. The neutral interest rate range and the committee's varying views within this range highlight the complexity of the economic landscape and the need for a nuanced policy response.

# References:
[1] https://www.nasdaq.com/articles/ftse-100-moderately-lower-boe-cuts-interest-rate-025
[2] https://www.ajbell.co.uk/news/articles/update-bank-england-lifts-gdp-forecast-votes-5-4-cut-rates
[3] https://commonslibrary.parliament.uk/research-briefings/sn02802/