The UK’s central bank has lowered interest rates for the fifth time in a year, setting the base rate at 4%. But it also cautioned that inflation may rise due to the impact of climate change on global food supplies.
Governor Andrew Bailey highlighted that while the direction for rates is down, environmental disruptions to crops and rising domestic labor costs pose serious risks to stability.
The decision was passed by a narrow majority of 5-4, reflecting tensions within the Monetary Policy Committee. Bailey warned that the economy faces dual threats: sluggish growth and rising costs.
Global weather extremes are affecting cocoa and coffee production, while UK wage and tax policies are pressuring retailers to raise prices. The result may be renewed inflationary spikes in essential goods.
