The Bank of England’s Monetary Policy Committee (MPC) voted on Thursday to lower the official Bank Rate by 0.25 percentage points, taking it from 4.5% to 4.25%. This marks the fourth cut since August 2024, as policymakers seek to shield the UK economy from mounting external headwinds above all, the spillover from U.S. tariffs and broader global trade uncertainty under President Donald Trump.
Governor Andrew Bailey noted that “inflationary pressures have continued to ease,” enabling today’s reduction. Yet he stressed the need for “a gradual and careful approach to further rate cuts,” given persistent uncertainty over both global trade policy and domestic factors such as the recent rise in employer National Insurance contributions.
Alongside the rate decision, the MPC published fresh economic projections showing UK growth slowing by an additional 0.3 percentage points over the next three years. The committee now expects inflation to peak at around 3.5% in Q3 2025 slightly below prior forecasts before easing back toward the 2% target by spring 2027.
The vote was split: seven members backed a 25 basis-point cut, two preferred a larger 50 basis-point reduction, and two voted to hold rates at 4.5%. Financial markets have since priced in at least two more quarter-point cuts later this year, though the National Institute of Economic and Social Research argues that only one further reduction may be feasible before year-end.
Chancellor Rachel Reeves, who has faced criticism over recent increases in business taxation, welcomed the cut as offering “some breathing space” to households and firms. Nonetheless, Bailey cautioned that “growth is judged to have slowed and is expected to remain subdued in the near term,” reflecting both global headwinds and domestic drag from tighter fiscal policy.
With inflation still above target and the outlook uncertain, the Bank has signaled that its future decisions will balance support for growth against its overriding commitment to price stability.
