Sterling Sinks as Bank of England Slashes Rates Amid Bleak Economic Forecast

The British pound experienced a significant decline following the Bank of England's recent decision to cut interest rates by 0.25 percentage points, bringing them down to 4.5%. This move, aimed at stimulating the UK's sluggish economy, was accompanied by a stark revision of growth projections, with the central bank halving its 2025 forecast from 1.5% to 0.75%.

Concurrently, inflation is anticipated to peak at 3.7% by autumn, nearly double the government's target. Despite these challenges, Governor Andrew Bailey signaled the possibility of further rate reductions, emphasizing a cautious and gradual approach to future monetary policy adjustments.

In response to these developments, the pound fell to $1.2370, reflecting investor concerns over the nation's economic trajectory. The Bank's Monetary Policy Committee displayed a divergence in perspectives, with two members advocating for a more substantial rate cut, underscoring the prevailing uncertainty.

As the UK grapples with these economic headwinds, the central bank remains vigilant, balancing efforts to foster growth while keeping inflation in check.