The Bank of England (BoE) Monetary Policy Committee (MPC) needed an unprecedented second round of voting to decide to cut interest rates by 25 basis points to 4 per cent.

With the first vote ending with four members calling for interest rates to be held, four voting for the 25 basis points reduction, and one voting for a 50 basis point cut, another vote was required to come to a decision.

The member calling for a 50 basis point reduction, Alan Taylor, changed his vote in the second round to leave five members backing a 25 basis point cut.

The only other time votes were tied on an MPC interest rate decision was in March 1998, when the committee was one member short and the votes were tied at four-four.

“We’ve cut interest rates today, but it was a finely balanced decision,” said BoE governor, Andrew Bailey.

“Interest rates are still on a downward path, but any future rate cuts need to be made gradually and carefully.”

Chancellor, Rachel Reeves, welcomed the rate cut and claimed that the stability the government had brought to public finances helped in bringing down interest rates.

Rathbones head of allocation, Oliver Jones, said the firm expected the BoE to keep cutting interest rates once a quarter into next year.

“Despite the recent concerns about the quality of the data, it's increasingly clear that the UK labour market is weakening with jobs vacancies generally below pre-pandemic levels and numbers of employees clearly falling,” he continued.

“For these reasons we expect the bank to keep loosening rates, despite inflation well above 3 per cent. The biggest risk to this would be any evidence that inflation will not fall back as fast as expected next year.”

Quilter Cheviot head of fixed interest research, Richard Carter, added that the fifth interest rate cut in a year suggested that the BoE was getting increasingly concerned about the health of the UK economy.

“The market hopes the MPC will pull the trigger again this year, but as the division on the last few decisions shows, even that might be put in doubt with any small change to the data,” he stated.

“Today’s vote was on a knife-edge and required a second vote, with one member voting for a bigger rate cut, while four voted for no cut at all. This divergence in views makes interest rate decisions hard to forecast and highlights the difficult position the UK economy is in.

“The problem facing the UK is that the issues show no signs of abating. Speculation is rife about which taxes will be next to be raised at the upcoming Budget and that is likely to weigh further on growth and consumer confidence, just as it did last year.

“It is looking like some tax rises in the past year have backfired, with employers making job cuts and wealthier individuals leaving the UK.”

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