- Decision
- Lower
- Rate change
- 25 bps
- bank rate
- 4.5%
The Bank of England’s Monetary Policy Committee voted 7–2 to cut Bank Rate by 25 bp to 4.5 per cent at its meeting ending 5 February, judging that “substantial progress on disinflation” and a broadly balanced labour market justify a modest withdrawal of restraint while keeping policy in restrictive territory to quell lingering price pressures. Consumer price index inflation eased to 2.5 per cent in 2024 Q4 and underlying wage and price indicators have cooled, yet higher global energy costs and regulated price changes are expected to lift headline CPI to 3.7 per cent in 2025 Q3 before it returns to about the 2 per cent target; private-sector wage growth is projected to slow to roughly 3¾ per cent by year-end. GDP is estimated to have slipped 0.1 per cent in 2024 Q4 after weaker-than-expected activity and softer business and consumer confidence, though output is seen edging up 0.1 per cent in 2025 Q1 and strengthening from mid-year; supply capacity growth has weakened as productivity disappoints, leaving only a small margin of slack. A slight depreciation in the sterling effective exchange rate has accompanied lower gilt yields, partly reflecting increased global uncertainty following new US trade-tariff announcements that have heightened financial-market volatility. The Committee reiterated that policy must “remain restrictive for sufficiently long” and signalled a “gradual and careful” approach to any further easing, with the balance of risks hinging on the evolution of demand, supply and inflation persistence.
Rate evolution
Since June 2025, the Bank of England has cut Bank Rate by 50 basis points from 4.25% to 3.75%, with reductions in August and December, an autumn pause and holds in April, June, July and September 2026, citing substantial disinflation, weak GDP growth, a loosening labour market and moderating pay. The Monetary Policy Committee remained vigilant over services inflation, expectations and wage and price persistence as administered, food and energy prices lifted headline CPI inflation, but by late 2025 and early 2026 it judged persistence risks less pronounced and weaker demand more apparent as CPI inflation peaked and pay and services inflation eased further, while retaining a gradual, non-pre-set easing bias.
In April, the Committee voted 8-1 to maintain Bank Rate at 3.75%, with one member preferring an increase to 4%, as the Middle East conflict raised the energy price outlook and CPI inflation increased to 3.3%, flagging risks of second-round effects while noting that a loosening labour market, a weakening economy and tighter financial conditions could contain inflationary pressures. It held Bank Rate at 3.75% by a 7-2 vote in June as CPI inflation fell to 2.8% and global energy prices declined but remained above pre-conflict levels and volatile, then held again by a 6-3 vote on 29 July, when three members preferred an increase to 4% and persistent energy-price volatility and second-round risks tilted inflation risks upward despite continued underlying disinflation and a fall in CPI inflation to 2.6%.
At its meeting ending on 16 September, the Committee maintained Bank Rate at 3.75% by another 6-3 vote, with three members again preferring an increase to 4%, as the protracted Middle East conflict drove further increases in volatile energy prices and CPI inflation rose to 3.1% in August. It noted little evidence so far of material second-round effects and said soft labour market conditions and higher interest rates faced by households and businesses would reduce inflation over time despite slightly stronger activity, but judged that risks to the inflation outlook had tilted further to the upside since July.