Economists predict a quarter-point reduction from the current 4.75% to 4.5%, marking the first cut of the year.

While the move aims to stimulate a sluggish economy that has underperformed since the bank’s last projections in November, policymakers face a tricky balancing act. Recent data indicates inflation, currently at 2.5% in December, might be on the rise again. Factors contributing to this inflationary pressure include increasing energy costs and the impact of policies announced in the October budget, such as higher National Insurance contributions for businesses.

Experts suggest that the decision is almost certain, with the monetary policy committee likely to vote overwhelmingly in favour of the cut. A reduction in interest rates would likely benefit mortgage borrowers on variable rates, but could mean lower returns for savers who have been enjoying relatively high interest rates in recent times.

Despite the predicted short-term action, the Bank of England faces a long-term dilemma – its latest projections are anticipated to show weaker growth alongside higher near-term inflation compared to its meeting three months ago. Some economists are forecasting a total of four cuts this year, The Guardian reports.