Interest rates cut to 4% as UK inflation picks up

The Bank of England has voted to cut the base interest rate to 4% (Yui Mok/PA)

UK interest rates have been cut to their lowest level since March 2023 despite the Bank of England predicting a sharp rise in inflation amid accelerating food prices.

The central bank chose to reduce interest rates to 4% from 4.25%, pointing towards a recent fall in wage inflation and reduced uncertainty over the impact of US tariffs.

The cut came after the Bank’s nine-person rate-setting committee was forced to take a second vote for the first time in its history.

The Bank’s Monetary Policy Committee (MPC) initially saw four of its committee vote for the 0.25 percentage point reduction, four vote to keep rates at 4.25% and one, Alan Taylor, vote for a 0.5 percentage point cut.

Governor Andrew Bailey then led a second vote, where Mr Taylor gave his backing for a cut to 4%, providing a majority of five to four.

Mr Bailey said: “We’ve cut interest rates today, but it was a finely balanced decision.

“Interest rates are still on a downward path, but any future rate cuts will need to be made gradually and carefully.”