In an effort to bolster economic growth, the Bank of England has reduced its key interest rate to 4%. However, the decision comes with a warning: rising food prices could keep inflation high into the year-end.
The vote by the MPC was unusually close, revealing divisions over how to respond to conflicting economic signals. With inflation rising to 3.6% in June, the Bank is treading carefully.
Governor Bailey’s comments suggested that while the general trend is toward easing, risks remain. Unfavorable weather abroad and government-imposed domestic costs are fueling food price inflation.
Despite claims of progress by ministers, the outlook remains fragile. Employers face pressure from tax hikes and wage increases, and consumers are likely to feel the pinch at the supermarket.
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