The Bank of England has cut interest rates by 25 basis points to 4.75% as expected.
The Bank’s Monetary Policy Committee voted eight to one in favour of cutting rates following a drop in the rate of inflation to 1.7% in September, a press release said.
“There has been continued progress in disinflation, particularly as previous external shocks have abated, although remaining domestic inflationary pressures are resolving more slowly,” it added, with inflation predicted to climb to 2.5% by the year-end.
The Bank also forecast last month’s Autumn Budget would boost UK gross domestic product by around 0.75% at its peak in a year’s time relative to previous projections.
Consumer price inflation was expected to be boosted by “just under” 0.5% at its peak as a result of the Budget.
“The impact of the Budget announcements on inflation will depend on the degree to and speed with which these higher costs pass through into prices, profit margins, wages and employment,” the Bank added.
Fidelity International portfolio manager Shamil Gohil noted the Monetary Policy Committee had "a tough job balancing the future impact of the UK Budget and government’s fiscal policy" going forward.
"Cost increases for companies from higher taxes, national insurance and national minimum wage will likely be at least partially passed on to consumers via price hikes next year," he added.
"Fiscal stimulus should also have a positive impact on growth, allaying any recessionary fears. Therefore, the sensible path continues to be for a gradual and cautious easing process as these effects are slowly realised over time."