Chancellor Rachel Reeves has welcomed the decision by the Bank of England to cut interest rates for the first time since March 2020 – but said many families are still struggling with high mortgage payments.
In a narrow five-four vote, the Bank reduced rates from 5.25% to 5%, which is likely to help those with mortgages.
The Chancellor cautioned that, while the move was “welcome news”, she said: “Millions of families are still facing higher mortgage rates after the mini-Budget.
“This is why this government is taking the difficult decisions now to fix the foundations of our economy after years of low growth, so we can rebuild Britain and make every part of our country better off.”
READ MORE: Labour ensures minimum wage takes account of cost of living for first time
TUC general secretary Paul Nowak said that the rate cut would “give relief to millions of families and businesses”, adding the reduction should be the “first of many”.
He said: “Working people didn’t cause the huge spike in inflation. But they have paid the price for the Conservatives’ economic failures with sky-high bills and mortgage payments.
“Labour’s plans to invest in industry and deliver a New Deal for Workers can help create a new period of economic stability, with prices kept under control and living standards recovering.”
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Senior economist at the Institute for Public Policy Research (IPPR) Carsten Jung said the Bank was right to cut rates, but had “waited too long to do so”.
He said: “The Bank has been holding back the UK’s economic recovery by under-appreciating the long-term effect of high interest rates.
“The UK is still 6% below its pre-pandemic growth path, behind the United States and the Eurozone, and the Bank today confirmed that it expects growth to remain weak.
“With inflation expectations back at pre-pandemic levels and the labour market cooling, now is the time for the Bank to signal clearly that it will continue the lowering interest rates in the coming months.”
Speaking after the rate cut announcement, Governor of the Bank of England Andrew Bailey said: “Inflationary pressures have eased enough that we’ve been able to cut interest rates today.
“But we need to make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much. Ensuring low and stable inflation is the best thing we can do to support economic growth and the prosperity of the country.”
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