Interest rates slashed to lowest point in 16 months

At its meeting ending on Wednesday 6 November, The Monetary Policy Committee (MPC) voted by a majority of 8–1 to reduce the rate from 5% to 4.75%. One member preferred to maintain the figure.

It is the second time so far this year the bank has lowered interest rates and marked the lowest number since June 2023, which was the last time the figure was below 5%.

The BoE report said: “There has been continued progress in disinflation, particularly as previous external shocks have abated, although remaining domestic inflationary pressures are resolving more slowly.”

Though the “positive news” is overshadowed by “£3.4bn in looming cost increases” for hospitality firms, one trade body said.

Taking action 

UKHospitality (UKH) chief executive Kate Nicholls said: “This interest rate cut is positive news in the short-term for hospitality businesses, particularly those still struggling with pandemic debt repayments, and consumer confidence.

“However, the short-term benefit of this cut is significantly overshadowed by the looming £3.4bn worth of cost increases that will hit the sector in April.

“Those changes will impact the potential for future interest rate cuts too, with forecasts already revised down following the Budget.

“We need the Government to take action to mitigate these increases. particularly the lowering of the employer NIC threshold.

“Lowering the threshold to £5,000 suddenly brings in thousands of part-time staff, and that disproportionately hits hospitality. Government action to reduce the devastating cost impact in April is essential.”

Long-term viability 

In addition, while the headline rate of inflation was estimated to have fallen to 1.7% in September, ​down from 2.2% in August, the bank warned this was “expected to increase to around 2.5% by the end of the year”, attributed to energy prices.

British Beer & Pub Association (BBPA) chief executive Emma McClarkin said: “Publicans and brewers will welcome the decision to cut interest rates, given this will help reduce one component cost of doing business. 

“However, following the Budget, the overall cost of doing business across the sector has sharply increased.

“We look forward to working closely with the Government at how to reduce these rises, including swiftly implementing vital long term business rates reform to help ensure long-term business viability and the opportunity to grow.”

In September, the bank held interest rates at 5% after reducing the figure from 5.25% in August, which it had been stagnant at for some time.