Bank of England Cuts Interest Rate to 4.25% Amid Economic Slowdown Concerns
The Bank of England has reduced its base interest rate by 0.25 percentage points, bringing it down to 4.25%. This marks the fourth rate cut since August 2024 as the central bank seeks to support the UK economy amid signs of weakening growth and rising external pressures.
The decision was made following a divided vote among members of the Monetary Policy Committee (MPC). Five members supported the 0.25% cut, two argued for a steeper 0.5% reduction, and two preferred to keep rates unchanged, highlighting the uncertainty and complexity of the economic landscape.
Economists have raised concerns that the current rate cut may not be sufficient to prevent a recession, especially given new U.S. tariffs and continued global trade disruptions. Former government advisor Patrick Minford warned that stronger measures may be needed to stimulate demand and prevent further economic decline.
Bank of England Governor Andrew Bailey acknowledged the fragility of the UK’s economic recovery and emphasized a cautious, data-driven approach to any future rate decisions. While inflation has been easing and is projected to return to the Bank’s 2% target by early 2027, unemployment is forecast to rise to 5% over the next year.
In response to the rate cut, several major lenders have begun lowering their mortgage rates, offering some relief to homeowners and prospective buyers. However, the broader impact on household spending and business investment remains uncertain.
The Bank of England is expected to closely monitor economic indicators in the coming months to determine whether further rate adjustments will be necessary to maintain stability and encourage growth.
