Interest rates cut but Bank of England halves growth forecast

Last week, Chancellor Rachel Reeves announced a number of measures to try to boost the UK economy.

However, her decision in last year’s Budget to increase employers’ National Insurance contributions from April has led to a wave of criticism from businesses, who argue it will push up prices and hit investment and jobs.

Mr Bailey said the impact of the Budget, particularly the looming higher costs of employing people, was feeding through into lower confidence for businesses and households.

“There’s no question that the increase in the cost of employment does have an effect,” he told the BBC.

“We’re very focused on how that increased cost of employment is going to pass through.”

Sir Keir told the BBC the government would turn the economy around with a focus on “build baby build” and by making “tough decisions whether on planning, on infrastructure, on nuclear”.

Shadow chancellor Mel Stride said while the rate cut would be good news for many families and businesses, the government’s “disastrous Budget” was likely to mean fewer rate cuts this year than expected.

Paul Johnson, director of the Institute for Fiscal Studies think tank, said it was “very worrying” for the government that the Bank of England has “really, quite significantly” downgraded its forecasts for economic growth.

He added that if the official government forecaster – the Office for Budget Responsibility – changes its forecast in line with the Bank’s then “the chancellor is in big trouble” when it comes to meeting her self imposed debt rules.

“That means… the tax revenues the chancellor is relying on are unlikely to come in as expected, and even tougher choices on spending and tax going forward.”