The Bank of England cut interest rates on Thursday for the third time in about six months, amid signs of weak economic growth in Britain and an unexpected slowdown in inflation. But it warned that there would be a temporary pick up in inflation and that a possible global trade war could weigh on the economy.
Policymakers cut the key rate a quarter point to 4.5 percent as the bank lowered its forecasts for economic growth this year, after months of stagnation.
“We live in an uncertain world, and the road ahead will have bumps,” said Andrew Bailey, the governor of the central bank.
Though he said that inflation was also likely to rise through most of this year, policymakers still expected the inflation rate to return to the 2 percent target in the next few years.
Policymakers expect to cut interest rates further, Mr. Bailey said. “But we will have to judge meeting by meeting how far and how fast.”
The inflation rate slowed slightly to 2.5 percent in December, when economists had been expecting it to hold steady. Crucially, inflation in the services sector, which has been particularly stubborn, slowed to 4.4 percent, from 5 percent in November, opening the door to Thursday’s rate cut.
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