The Bank of England's Monetary Policy Committee voted five to four on 1 August 2024 to reduce Bank Rate by 25 basis points to 5.00%, delivering the first cut in the policy rate since the emergency easing of March 2020. The minutes noted that, for some members who voted for the cut, the decision was finely balanced. The cut followed a run of 14 consecutive rate increases between December 2021 and August 2023.

Governor Andrew Bailey and four colleagues voted in favour of the 25 basis-point reduction: Deputy Governors Sarah Breeden, Clare Lombardelli and Dave Ramsden, and external member Swati Dhingra. The remaining four members of the committee preferred to hold Bank Rate at 5.25%, arguing that services inflation and wage dynamics remained too elevated to support the first cut. The individual voting positions were published in the minutes.

THE FIVE MEMBERS WHO VOTED TO CUT

The majority that supported the reduction comprised the Governor, three Deputy Governors and one external member. Swati Dhingra had voted for a cut at every meeting since February 2024. Clare Lombardelli was participating in her first MPC meeting following her appointment as Deputy Governor for Monetary Policy.

The four members who dissented made clear in the minutes that their reservations centred on the stickiness of domestically generated inflation, particularly in services. They pointed to upside news on services inflation and GDP and continued elevated wage growth, judged that structural shifts in the economy could make inflation persistence more enduring, and wanted stronger evidence before reducing Bank Rate.

FIRST CUT SINCE MARCH 2020

The previous cut, on 19 March 2020, was an emergency measure taken at the onset of the Covid-19 pandemic. The current reduction follows a period in which Bank Rate was raised from 0.10% in late 2021 to a peak of 5.25%. CPI inflation had fallen back to the 2% target in May 2024 and remained there in June.

Governor Bailey said the Bank needed to be careful not to cut interest rates too quickly or by too much. The Bank affirmed its data-dependent approach, with each future decision to be assessed against incoming evidence on inflation, wages, activity, and the global economic backdrop.