Bank of England Cuts Interest Rate to 4%

Earlier this month, the Bank of England's Monetary Policy Committee (MPC) voted to reduce the Bank Rate by 0.25 percentage points to 4%, the lowest level since March 2023. This decision marks the fifth rate cut in the past year and reflects a cautious approach to balancing inflation control with economic growth.

Divergent Views Within the MPC

The vote was split 5-4. Four members expressed concerns about rising inflation, which is projected to peak at 4% in September, double the Bank's 2% target. Despite these concerns, the majority opted for the rate cut, citing weakening economic indicators and the need to support growth.

Economic Context and Inflation Outlook

The UK economy is showing signs of strain, with GDP growth slowing and unemployment rising to 4.7%. Inflation, driven by higher food and energy prices, remains a significant challenge. The Bank forecasts inflation will return to the 2% target by mid-2027, later than previously anticipated.

For more detailed information, you can read the full Monetary Policy Summary and Minutes here: Bank of England – August 2025.