- Decision
- Lower
- Rate change
- 25 bps
- bank rate
- 4.25%
The Bank of England’s Monetary Policy Committee voted 5–4 to cut Bank Rate by 25 bp to 4.25 per cent at its meeting ending 7 May, judging that continued progress in disinflation, slowing underlying GDP growth and a loosening labour market warranted a modest easing while policy remains restrictive to contain persistent price pressures. The step resumes the gradual withdrawal of restraint after February’s 25 bp cut and a March hold. Twelve-month CPI inflation fell to 2.6 per cent in March but is expected to rise temporarily to about 3.5 per cent in 2025 Q3 before declining, as private-sector pay growth—still elevated—is projected to decelerate later this year amid weak demand; Bank staff see headline GDP expanding by just 0.1 per cent in the second quarter. Falling wholesale energy costs and lower market-implied rate expectations coincide with heightened global trade-policy uncertainty following new US tariffs, which the MPC believes could dampen global and UK activity with two-sided inflation risks. Policymakers stressed that policy is not on a pre-set path and signalled that any further cuts will be “gradual and careful”, with rates kept restrictive until the committee is confident inflation will return sustainably to the 2 per cent target.
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.