Commenting on the decision of the Monetary Policy Committee of the Bank of England to cut interest rates to 4.75%, Anna Leach, Chief Economist of the Institute of Directors, said:

“Today’s 8-1 vote by the MPC to cut interest rates was as expected by markets and analysts, despite the bigger-than-expected fiscal loosening announced at the Budget. The Bank is in agreement with the OBR that Budget measures will lift inflation by just under 0.5% points and has otherwise not changed its forward guidance on interest rates. This may imply a view that inflation having been lower than expected in recent months is cancelled out by the inflationary impact of the Budget, alongside lingering concerns about inflation persistence.

“The Bank notes some uncertainty regarding the likely path for inflation and interest rates following the Budget. But the market reaction so far, as well as a higher pathway for inflation, imply tighter credit conditions for businesses and households. On balance, we look set for fewer interest rate cuts than might otherwise have been the case.”