UK cuts base rate by 0.25%p…"Approach cautiously in the future"

5 out of 9 MPC members support the cut…Some argue for a 0.5%p cut

Matches market expectations…FTSE 100 and 250 both close higher

Reuters: "Decision might have been delayed without US tariffs"

Bank of England: "Global uncertainty necessitates cautious future cuts"

The Bank of England (BoE), the UK's central bank, held a Monetary Policy Committee (MPC) meeting on the 8th (local time) and decided to cut the base rate by 0.25 percentage points to 4.25% annually. This decision aligns with market experts' expectations.

Out of the 9 MPC members, 5 supported the 0.25 percentage point cut, while 2 argued for a more aggressive 0.5 percentage point cut. The remaining 2 members opined that the rate should be held steady. It was expected that there would be unanimous support for the cut, but opinions were significantly divided.

This is the fourth rate cut by the Bank of England since mid-last year. The UK's base rate peaked at 5.25% annually in August last year, and since then, it has been cut by 0.25 percentage points four consecutive times.

The Bank of England operates its base rate with an annual inflation target of 2%. As of March this year, the UK's consumer price inflation rate was 2.6%, still above the target. Reuters assessed that "the decision to cut rates this month might have been uncertain without the economic burden from tariffs."

However, the Bank of England maintained a cautious stance on future rate policies. Andrew Bailey, Governor of the Bank of England, stated, "The past few weeks have shown how unpredictable the global economy can be," and emphasized that "future rate cuts need to be gradual and cautious."

The Bank of England has cut rates similarly to the US Federal Reserve (Fed) so far, but at a slower pace than the European Central Bank (ECB). This reflects concerns about high wage growth and entrenched inflation. Investors see about a 50% chance that the Bank of England will cut rates again in June.

The UK stock market reacted positively to the rate cut news. The FTSE 100 index rose by 0.4%, and the FTSE 250 index closed up by 1.2%.

Reporter Da-yeon Lim allopen@hankyung.com