The Bank of England has lowered its main interest rate from 4.75% to 4.5%, marking the third reduction in six months, as the UK economy shows signs of stagnation.
On February 6, 2025, the Bank of England (BoE) announced a 25 basis point cut to its benchmark interest rate, bringing it down to 4.5%. This decision aligns with market expectations and reflects ongoing concerns about the UK’s economic performance.
The Monetary Policy Committee (MPC) voted 7-2 in favor of the reduction, with two members advocating for a more substantial 50 basis point cut. This move is intended to support the BoE’s goal of returning inflation to its 2% target, as recent data indicates a decline in inflation rates.
Despite these efforts, the UK economy has experienced minimal growth over the past six months, leading to a downward revision of the BoE’s growth forecast for 2025 to 0.75%. Governor Andrew Bailey emphasized the importance of closely monitoring economic indicators to inform future policy decisions.
Analysts suggest that further rate cuts may be on the horizon if economic conditions do not improve. The BoE’s actions are part of a broader trend among central banks, including the European Central Bank and the Bank of Canada, which have also recently reduced interest rates to stimulate their economies.
The rate cut is expected to provide relief to borrowers through lower mortgage rates, while savers may see reduced returns on their deposits. The BoE remains committed to adjusting its monetary policy as needed to foster economic stability and growth.
