Weak jobs market and above-target inflation will dent Reeves’s growth plans and may wipe out fiscal headroom

• Bank cuts interest rates to 4.5% and halves UK growth forecast
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With the public finances tight and Rachel Reeves having pledged to balance the books, interest rate cuts are one of the few levers that could boost the UK’s economic growth in the short term, and the chancellor will be glad of the Bank of England’s quarter point reduction on Thursday – and the clear signal that it is now in cutting mode.

Seven of the monetary policy committee’s (MPC) nine members backed the quarter point drop, taking the Bank’s policy rate to 4.5%, while two wanted to be more “activist”, proposing a half point cut. The Bank of England’s governor, Andrew Bailey, said the MPC would be “taking a gradual and careful approach to reducing rates further”.