On 7th August 2025, the Bank of England’s Monetary Policy Committee voted narrowly—5 to 4—in favour of reducing the base interest rate by 0.25% to 4%, marking its lowest level since March 2023.
This is the fifth rate cut in a year, aimed at stimulating growth amid sluggish GDP and persistent inflation, which currently stands at 3.6%.
Governor Andrew Bailey reportedly described the decision as part of a ‘gradual and careful’ easing strategy, balancing inflation risks with signs of a softening labour market.
While some committee members reportedly advocated for a larger cut, others urged caution, reflecting deep divisions over the UK’s economic trajectory.
The move is expected to ease borrowing costs for homeowners and businesses, with tracker mortgage rates falling immediately. However, savers will be losing out as rates continue to drop.
However, analysts warn that future cuts may hinge on upcoming fiscal decisions and inflation data, leaving the path forward uncertain.
Inflation is yet to be fully tamed.