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Bank of England lowers its main interest rate by 0.25%, to 5%, its first cut in over 4 years

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Bank of England lowers its main interest rate by 0.25%, to 5%, its first cut in over 4 years
News

News

Bank of England lowers its main interest rate by 0.25%, to 5%, its first cut in over 4 years

2024-08-01 22:59 Last Updated At:23:01

LONDON (AP) — The Bank of England has cut interest rates for the first time since the onset of the COVID-19 pandemic in early 2020 as inflationary pressures in the economy have eased.

In a statement Thursday, the bank said that by a 5-4 margin, its policymaking panel backed a quarter-point reduction in its main interest rate to 5%, from the 16-year high of 5.25%.

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The Bank of England in London, Thursday, Aug. 1, 2024. Economists are divided as to whether the Bank of England, which is independent of government, will cut its main interest rate by a quarter-point from the current 16-year high of 5.25%, or hold off until September.(AP Photo/Alberto Pezzali)

The Bank of England in London, Thursday, Aug. 1, 2024. Economists are divided as to whether the Bank of England, which is independent of government, will cut its main interest rate by a quarter-point from the current 16-year high of 5.25%, or hold off until September.(AP Photo/Alberto Pezzali)

Andrew Bailey, Governor of the Bank of England, gestures as he addresses the media during a press conference at the Bank of England in London, Thursday, Aug. 1, 2024. The Bank of England has cut interest rates for the first time since the onset of the COVID-19 pandemic in early 2020. In a statement Thursday, the bank said that by a 5-4 margin, its nine-member policymaking panel backed a quarter-point reduction in its main interest rate to 5%, from the 16-year of 5.25%. (AP Photo/Alberto Pezzali, Pool)

Andrew Bailey, Governor of the Bank of England, gestures as he addresses the media during a press conference at the Bank of England in London, Thursday, Aug. 1, 2024. The Bank of England has cut interest rates for the first time since the onset of the COVID-19 pandemic in early 2020. In a statement Thursday, the bank said that by a 5-4 margin, its nine-member policymaking panel backed a quarter-point reduction in its main interest rate to 5%, from the 16-year of 5.25%. (AP Photo/Alberto Pezzali, Pool)

The Bank of England in London, Thursday, Aug. 1, 2024. Economists are divided as to whether the Bank of England, which is independent of government, will cut its main interest rate by a quarter-point from the current 16-year high of 5.25%, or hold off until September.(AP Photo/Alberto Pezzali)

The Bank of England in London, Thursday, Aug. 1, 2024. Economists are divided as to whether the Bank of England, which is independent of government, will cut its main interest rate by a quarter-point from the current 16-year high of 5.25%, or hold off until September.(AP Photo/Alberto Pezzali)

Andrew Bailey, Governor of the Bank of England, gestures as he addresses the media during a press conference at the Bank of England in London, Thursday, Aug. 1, 2024. The Bank of England has cut interest rates for the first time since the onset of the COVID-19 pandemic in early 2020. In a statement Thursday, the bank said that by a 5-4 margin, its nine-member policymaking panel backed a quarter-point reduction in its main interest rate to 5%, from the 16-year of 5.25%. (AP Photo/Alberto Pezzali, Pool)

Andrew Bailey, Governor of the Bank of England, gestures as he addresses the media during a press conference at the Bank of England in London, Thursday, Aug. 1, 2024. The Bank of England has cut interest rates for the first time since the onset of the COVID-19 pandemic in early 2020. In a statement Thursday, the bank said that by a 5-4 margin, its nine-member policymaking panel backed a quarter-point reduction in its main interest rate to 5%, from the 16-year of 5.25%. (AP Photo/Alberto Pezzali, Pool)

The Bank of England in London, Thursday, Aug. 1, 2024. Economists are divided as to whether the Bank of England, which is independent of government, will cut its main interest rate by a quarter-point from the current 16-year high of 5.25%, or hold off until September.(AP Photo/Alberto Pezzali)

The Bank of England in London, Thursday, Aug. 1, 2024. Economists are divided as to whether the Bank of England, which is independent of government, will cut its main interest rate by a quarter-point from the current 16-year high of 5.25%, or hold off until September.(AP Photo/Alberto Pezzali)

It's the latest central bank to cut interest rates following a long stretch of increases. The U.S. Federal Reserve has yet to take the step but many think it will be ready to next month.

Many economists thought that the Bank of England, which is independent of government, would join the Fed in keeping rates on hold once again given persistent price pressures in the services sector, which accounts for around 80% of the British economy.

Though those concerns remain, certainly among the four opting to keep borrowing rates on hold, the majority on the panel think the hard medicine of higher borrowing costs has worked, with inflation in the U.K overall down at the bank’s target of 2%.

“Inflationary pressures have eased enough that we’ve been able to cut interest rates today,” said Bank Gov. Andrew Bailey, who voted for a cut. “But we need to make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much. Ensuring low and stable inflation is the best thing we can do to support economic growth and the prosperity of the country.”

Bailey's comment suggests that interest rates will not be falling dramatically over coming months, certainly nowhere near the pace that the bank had hiked them in recent years.

Central banks around the world dramatically increased borrowing costs from near zero during the coronavirus pandemic when prices started to shoot up, first as a result of supply chain issues built up during the pandemic and then because of Russia's full-scale invasion of Ukraine which pushed up energy costs.

Though no one is anticipating rates to fall to those previous lows, there are widespread expectations that the bank will cut again in coming months, especially as its forecasts suggest inflation will be below target in the next couple of years, despite a modest increase in the second half of the year.

“But ultimately it is the data that will determine how interest rates evolve from here, with the bank hoping its conviction that underlying inflation pressures are fading will be vindicated,” said Luke Bartholomew, deputy chief economist at abrdn, formerly known as Aberdeen Asset Management.

The cut — and the potential of future cuts — are welcome news to millions of mortgage holders, certainly those whose borrowing costs track the bank's headline rate, though it will likely mean that the savings rates offered by banks will be reduced.

David Hollingworth, associate director at L&C Mortgages, said the prospect of further rate cuts will help boost consumer confidence and that could help the housing market.

“That will be important reassurance to many that have been scarred by the turbulent and volatile periods in the mortgage market over the last couple of years," he said.

Higher interest rates — which cool the economy by making it more expensive to borrow — have helped ease inflation, but they’ve weighed on the British economy, which has barely grown since the pandemic rebound.

Critics of the Bank of England say it has being overly cautious about inflation in recent months and that it had maintained high interest rates for too long, unnecessarily harming the economy. Borrowing costs had been held at 5.25% since August last year, even though inflation was clearly on a downtrend while the economy stagnated.

It is a charge that’s also been leveled against the U.S. Federal Reserve, which kept rates unchanged on Wednesday. It is widely anticipated that the Fed will

Other central banks, including the European Central Bank, have opted to cut rates but are doing so cautiously.

The Bank of England in London, Thursday, Aug. 1, 2024. Economists are divided as to whether the Bank of England, which is independent of government, will cut its main interest rate by a quarter-point from the current 16-year high of 5.25%, or hold off until September.(AP Photo/Alberto Pezzali)

The Bank of England in London, Thursday, Aug. 1, 2024. Economists are divided as to whether the Bank of England, which is independent of government, will cut its main interest rate by a quarter-point from the current 16-year high of 5.25%, or hold off until September.(AP Photo/Alberto Pezzali)

Andrew Bailey, Governor of the Bank of England, gestures as he addresses the media during a press conference at the Bank of England in London, Thursday, Aug. 1, 2024. The Bank of England has cut interest rates for the first time since the onset of the COVID-19 pandemic in early 2020. In a statement Thursday, the bank said that by a 5-4 margin, its nine-member policymaking panel backed a quarter-point reduction in its main interest rate to 5%, from the 16-year of 5.25%. (AP Photo/Alberto Pezzali, Pool)

Andrew Bailey, Governor of the Bank of England, gestures as he addresses the media during a press conference at the Bank of England in London, Thursday, Aug. 1, 2024. The Bank of England has cut interest rates for the first time since the onset of the COVID-19 pandemic in early 2020. In a statement Thursday, the bank said that by a 5-4 margin, its nine-member policymaking panel backed a quarter-point reduction in its main interest rate to 5%, from the 16-year of 5.25%. (AP Photo/Alberto Pezzali, Pool)

The Bank of England in London, Thursday, Aug. 1, 2024. Economists are divided as to whether the Bank of England, which is independent of government, will cut its main interest rate by a quarter-point from the current 16-year high of 5.25%, or hold off until September.(AP Photo/Alberto Pezzali)

The Bank of England in London, Thursday, Aug. 1, 2024. Economists are divided as to whether the Bank of England, which is independent of government, will cut its main interest rate by a quarter-point from the current 16-year high of 5.25%, or hold off until September.(AP Photo/Alberto Pezzali)

Andrew Bailey, Governor of the Bank of England, gestures as he addresses the media during a press conference at the Bank of England in London, Thursday, Aug. 1, 2024. The Bank of England has cut interest rates for the first time since the onset of the COVID-19 pandemic in early 2020. In a statement Thursday, the bank said that by a 5-4 margin, its nine-member policymaking panel backed a quarter-point reduction in its main interest rate to 5%, from the 16-year of 5.25%. (AP Photo/Alberto Pezzali, Pool)

Andrew Bailey, Governor of the Bank of England, gestures as he addresses the media during a press conference at the Bank of England in London, Thursday, Aug. 1, 2024. The Bank of England has cut interest rates for the first time since the onset of the COVID-19 pandemic in early 2020. In a statement Thursday, the bank said that by a 5-4 margin, its nine-member policymaking panel backed a quarter-point reduction in its main interest rate to 5%, from the 16-year of 5.25%. (AP Photo/Alberto Pezzali, Pool)

The Bank of England in London, Thursday, Aug. 1, 2024. Economists are divided as to whether the Bank of England, which is independent of government, will cut its main interest rate by a quarter-point from the current 16-year high of 5.25%, or hold off until September.(AP Photo/Alberto Pezzali)

The Bank of England in London, Thursday, Aug. 1, 2024. Economists are divided as to whether the Bank of England, which is independent of government, will cut its main interest rate by a quarter-point from the current 16-year high of 5.25%, or hold off until September.(AP Photo/Alberto Pezzali)

MELBOURNE, Australia (AP) — Love him or hate him, Nick Kyrgios is good for tennis and the sport will get a boost from his return to Grand Slam action at the Australian Open — or so he says.

“We watch sport because we want personalities. ... It’s like drama, theater. For me, being personally back, it adds a bit of question marks to, like, ‘What is going to happen today?’ I love that. Every time I step out on court, I don’t know if I’m going to be super controversial in a good or bad way,” 2022 Wimbledon runner-up Kyrgios said on Friday, when he indicated he thinks he'll be able to compete despite a recent issue with an abdominal muscle.

“Throughout my career, it hasn’t always been good,” continued the 29-year-old Australian, wearing a green hat in support of his favorite NBA team, the reigning champion Boston Celtics, “but it’s added a lot of excitement to the game.”

As play begins at Melbourne Park on Sunday (Saturday EST), Kyrgios is sure to be among the players garnering the most attention from spectators, media and other athletes, assuming, that is, he is fit enough. He played a total of one singles match across 2023 and 2024 combined while dealing with knee and wrist problems.

He made it sound after a practice session Friday morning — and before a second one planned for the afternoon — as if he'll be ready for his first major in more than two years.

“It's good to be back. I think it’s important,” Kyrgios said. “I think the sport was getting a bit mundane.”

No matter what anyone thinks of Kyrgios — and everyone, it seems, has an opinion, one way or another — there can be no doubt that he is anything but dull.

That goes for on the court, from the booming serves to the between-the-legs shots to the back-and-forths with chair umpires and spectators to the racket smashes and fine-drawing outbursts. Away from the tour, he never seems far away from headlines, either, including when he escaped conviction on a charge of common assault when he pleaded guilty to shoving a former girlfriend to the ground during an argument in 2021. And then there are the times when he offers his thoughts, as a TV commentator or via statements at news conferences or online, that upset folks, including lately about doping cases involving Jannik Sinner and Iga Swiatek.

“I know that people don’t like when I just speak out about things,” Kyrgios said recently, “and (am) honest about things.”

The most recent major tournament that Kyrgios was able to participate in was the 2022 U.S. Open.

He returned to competition last week at the Brisbane International tuneup tournament, playing one singles match and joining Novak Djokovic for two doubles matches.

When it comes to Kyrgios' talent, other players tend to agree with Jordan Thompson's assessment Friday: “If he’s fit, he’s a contender.”

Daniil Medvedev, the 2021 U.S. Open champion and a three-time runner-up at Melbourne Park, said a healthy Kyrgios is “definitely great for tennis.”

“I would love to see him play against Carlos (Alcaraz) and Jannik (Sinner). His biggest weapon is his serve (and) he has the skills and the hands,” Medvedev said. “I’m only happy if he comes back to tennis.”

AP tennis: https://apnews.com/hub/tennis

FILE - Andy Murray of Britain cries and waves to the spectators after he and his partner Daniel Evans defeated by Taylor Fritz and Tommy Paul of the United States in the men's doubles quarterfinals tennis match, at the 2024 Summer Olympics, Thursday, Aug. 1, 2024, at the Roland Garros stadium in Paris, France. (AP Photo/Andy Wong, File)

FILE - Andy Murray of Britain cries and waves to the spectators after he and his partner Daniel Evans defeated by Taylor Fritz and Tommy Paul of the United States in the men's doubles quarterfinals tennis match, at the 2024 Summer Olympics, Thursday, Aug. 1, 2024, at the Roland Garros stadium in Paris, France. (AP Photo/Andy Wong, File)

FILE - Naomi Osaka of Japan returns a shot to Coco Gauff of the United States in a women's singles match for the China Open tennis tournament held at the National Tennis Center in Beijing, Tuesday, Oct. 1, 2024. (AP Photo/Achmad Ibrahim, File)

FILE - Naomi Osaka of Japan returns a shot to Coco Gauff of the United States in a women's singles match for the China Open tennis tournament held at the National Tennis Center in Beijing, Tuesday, Oct. 1, 2024. (AP Photo/Achmad Ibrahim, File)

FILE - Australia's Nick Kyrgios returns the ball from between his legs to Serbia's Novak Djokovic in the final of the men's singles on day fourteen of the Wimbledon tennis championships in London, Sunday, July 10, 2022. (AP Photo/Alastair Grant, File)

FILE - Australia's Nick Kyrgios returns the ball from between his legs to Serbia's Novak Djokovic in the final of the men's singles on day fourteen of the Wimbledon tennis championships in London, Sunday, July 10, 2022. (AP Photo/Alastair Grant, File)

FILE - Nick Kyrgios, of Australia, tosses his racket as he plays Karen Khachanov, of Russia, during the quarterfinals of the U.S. Open tennis championships, Tuesday, Sept. 6, 2022, in New York. (AP Photo/Frank Franklin II, File)

FILE - Nick Kyrgios, of Australia, tosses his racket as he plays Karen Khachanov, of Russia, during the quarterfinals of the U.S. Open tennis championships, Tuesday, Sept. 6, 2022, in New York. (AP Photo/Frank Franklin II, File)

FILE - Serbia's Novak Djokovic, right, celebrates beating Australia's Nick Kyrgios in the final of the men's singles on day fourteen of the Wimbledon tennis championships in London, Sunday, July 10, 2022. (AP Photo/Kirsty Wigglesworth, File)

FILE - Serbia's Novak Djokovic, right, celebrates beating Australia's Nick Kyrgios in the final of the men's singles on day fourteen of the Wimbledon tennis championships in London, Sunday, July 10, 2022. (AP Photo/Kirsty Wigglesworth, File)

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