The economy is stagnating and job losses are mounting. Now is the time to cut interest rates again.

That was the view of the Bank of England’s nine-member rate setting committee on Thursday.

Well, at least five of them.

The other four presented us with a different view: Inflation is above target and climbing – this is no time to cut interest rates.

Who is right? All of them and none of them.

Central bankers have been backed into a corner by the current economic climate and navigating a path out is challenging.

The difficulty in charting that route was on display as the Bank struggled to decide on the best course of monetary policy.

The committee had to take it to a re-vote for the first time in the Bank’s history.

On one side, central bankers – including Andrew Bailey – were swayed by the data on the economy. Growth is “subdued”, they said, and job losses are mounting.

This should weigh on wage increases, which are already moderating, and in turn inflation.

One member, Alan Taylor, was so worried about the economy he initially suggested a larger half a percentage point cut.

On the other side, their colleagues were alarmed by inflation.

The Bank upgraded its inflation forecasts, with the headline index expected to hit 4% in September.

In a blow to the chancellor, the September figure is used to uprate a number of benefits and pensions. The Bank lifted it from a previous forecast of 3.75%.

In explaining the increase, the Bank blamed higher utility bills and food prices.

Food price inflation could hit 5.5% this year, an increase driven by poor harvests, some expensive packaging regulations as well as higher employment costs arising from the Autumn Budget.

When pressed by Sky News on the main contributor to that increase – poor harvests or government policy – the governor said: “It’s about 50-50.”

The Bank doesn’t like to get political but nothing about this is flattering for the chancellor.

The Bank said food retailers, including supermarkets, were passing on higher national insurance and living wage costs – the ones announced in the Autumn Budget – to customers.

Economists at the Bank pointed out that food retailers employ a large proportion of low wage workers and are more vulnerable to the lowering of the national insurance threshold because they have a larger proportion of part-time workers.

The danger doesn’t end there.

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Of all the types of inflation, food price inflation is among the most dangerous.

Households spend 11% of their disposable income, meaning higher food price inflation can play an outsized role in our perception of how high overall inflation in the economy is.

When that happens, workers are more likely to push for pay rises, a dangerous loop that can lead to higher inflation.

So while the chancellor is publicly celebrating the Bank’s fifth interest rate cut in a year, behind the scenes she will have very little to cheer.

The Bank of England has cut the interest rate for the fifth time in a year to 4% but warned that climbing food prices will cause inflation to jump higher in 2025.

In a tight decision that saw members of the rate-setting committee vote twice to break a deadlock, the Bank cut the rate to the lowest level in more than two-and-a-half years. Households on a variable mortgage of about £140,000 will save about £30 a month.

Andrew Bailey, governor of the Bank of England, said: “We’ve cut interest rates today, but it was a finely balanced decision. Interest rates are still on a downward path, but any future cuts will need to be made gradually and carefully.”

Money latest: What interest rate cut means for savers and borrowers

The Monetary Policy Committee (MPC), the nine-member panel that sets the base interest rate, voted in favour of lowering borrowing costs by 0.25 percentage points.

However, rate-setters failed to reach a unanimous decision, with four members of the committee voting to keep it on hold and another four voting for a 0.25 percentage point cut.

Alan Taylor, an external member of the committee, initially called for a larger 0.5 percentage point cut but after a second vote reduced that to 0.25% to break the deadlock. Had they failed to reach a decision, Mr Bailey, the governor, would have had the decisive vote.

It is the first time the committee has gone to a second vote and highlights the difficulty policymakers face in navigating the current economic climate, in which economic growth is stagnating, with at least one rate-setter fearing a recession, but inflation remains persistent.

Although the central bank voted to cut borrowing costs, it also raised its inflation forecasts on the back of higher food prices.

The bank predicted that the headline rate of inflation would hit 4% in September, up from a previous estimate of 3.75%.

The September inflation rate is used to uprate a range of benefits, including pensions.

The increase was driven by food, where the inflation rate could hit 5.5% this year. About a tenth of household spending is devoted to food shopping, which means it can have an outsized impact on inflation.

The Bank said this risked creating “second round effects”, whereby a sense of higher inflation forces people to push for pay rises, which could push inflation even higher.

Economists at the Bank blamed poor harvests, weather conditions, and changes to packaging regulations but also, in a blow to the chancellor, higher labour costs.

It pointed out that a higher proportion of workers in the food retail sector are paid the national living wage, which Rachel Reeves increased by 6.7% in April.

Economists at the Bank also blamed higher employment taxes announced in the autumn budget. “Furthermore, overall labour costs of supermarkets are likely to have been disproportionately affected by the lower threshold at which employers start paying NICs… these material increases in labour costs are likely to have pushed up food prices.”

There is also evidence that employers’ national insurance increases are causing businesses to curtail hiring, the Bank said. It comes as unemployment in the UK rose unexpectedly to a fresh four-year high of 4.7% in May. Separate data shows the number of employees on payroll has contracted for the fifth month in a row,

The Bank said the unemployment rate could hit 5% next year and warned of “subdued” economic growth, with one member – Alan Taylor – warning of an “increased risk of recession” in the coming years.

Donald Trump has announced 100% tariffs on computer chips and semiconductors made outside the US.

The move threatens to increase the cost of electronics made outside the US, which covers everything from TVs and video game consoles to kitchen appliances and cars.

The announcement came as Apple chief executive Tim Cook said his company would invest an extra $100bn (£74.9bn) in US manufacturing.

Soon, all smartwatch and iPhone glass around the world will be made in Kentucky, according to Mr Cook, speaking from the Oval Office.

“This is a significant step toward the ultimate goal of ensuring that iPhones sold in the United States of America are also made in America,” said Mr Trump.

“Today’s announcement is one of the largest commitments in what has become among the greatest investment booms in our nation’s history.”

Mr Cook also presented the president with a one-of-a-kind trophy made by Apple in the US.

Trump’s tariffs hit India hard

Mr Trump has previously criticised Mr Cook and Apple after the company attempted to avoid his tariffs by shifting iPhone production from China to India.

The president said he had a “little problem” with Apple and said he’d told Mr Cook: “I don’t want you building in India.”

India itself felt Mr Trump’s wrath on Wednesday, as he issued an executive order hitting the country with an additional 25% tariff for its continued purchasing of Russian oil.

Indian imports into the US will face a 50% tariff from 27 August as a result of the move, as the president seeks to increase the pressure on Russia to end the war in Ukraine.

Mr Trump told reporters at the White House he “could” also hit China with more tariffs.

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Apple’s ‘olive branch’

Apple, meanwhile, plans to hire 20,000 people in the US to support its extra manufacturing in the country, which will total $600bn (around £449bn) worth of investment over four years.

The “vast majority” of those jobs will be focused on a new end-to-end US silicon production line, research and development, software development, and artificial intelligence, according to the company.

Apple’s investment in the US caused the company’s stock price to hike by nearly 6% in Wednesday’s midday trading.

The rise may reflect relief by investors that Mr Cook “is extending an olive branch” to Mr Trump, said Nancy Tengler, chief executive of money manager Laffer Tengler Investments, which owns Apple stock.