The Bank of England has lowered interest rates from 4.75% to 4.5%, marking the lowest level since June 2023. The decision comes amid ongoing concerns about economic stagnation and inflationary pressures.
Chancellor Rachel Reeves welcomed the move, calling it a step toward easing financial strain on families and businesses. “This rate cut will help people struggling with the cost of living and make it easier for businesses to invest and grow,” she said.
However, she acknowledged that current growth levels remain disappointing. “Our Plan for Change is about driving the economy forward at a much faster pace,” she added.
Economic forecasts have also taken a hit. The Bank revised its 2025 growth projection down from 1.5% to 0.75%, citing rising energy costs, transport expenses, and water bills as key inflationary pressures.
Inflation is now expected to climb toward 4% by autumn, driven largely by surging gas prices.
Discussions within the Monetary Policy Committee revealed some disagreement on the scale of the cut. Seven members supported the 0.25% reduction, while two advocated for a more aggressive drop to 4.25%.
Economics editor Faisal Islam noted that policymakers had even considered a larger cut. “A deeper reduction of 0.5 percentage points was on the table, reflecting concerns that the UK’s economic slowdown could persist into next year,” he said.
Governor Andrew Bailey signaled a cautious approach to further cuts, pointing to global uncertainties, including U.S. President Donald Trump’s trade policies.
“Monetary policy adjustments will be gradual and measured,” he said, reinforcing the need for careful decision-making.
Lower rates may offer some relief, but concerns remain over inflation and sluggish growth. The coming months will reveal whether the Bank’s strategy can stabilize the economy or if further interventions will be needed.
