The Bank of England (BoE) has lowered its benchmark interest rate to 4.25%, marking the fourth consecutive cut since August 2024, in a decisive move to shore up the UK economy amid persistent signs of a slowdown.
The Monetary Policy Committee (MPC) voted to reduce the rate by 0.25 percentage points, citing weaker GDP growth and a loosening labour market as key concerns. This latest decision reflects growing anxiety over domestic demand and faltering business investment as inflation continues to stabilize below the BoE’s 2% target.
“Underlying economic momentum has faded since mid-2024,” the Bank stated in its summary. “Labour market indicators point to reduced hiring, and wage growth is moderating.”
This rate cut comes despite global uncertainty and financial market volatility, with some economists warning that continued easing could spark inflationary pressures if energy prices rebound.
However, the BoE emphasized that the decision is part of a “measured and data-dependent approach” to ensure the economy avoids stagnation. The UK narrowly escaped a technical recession earlier this year, and policymakers are now aiming to stimulate consumption and revive business confidence.
Financial markets responded cautiously to the move, with the pound dipping slightly against the dollar and gilt yields retreating amid renewed expectations of further monetary easing in the coming months.
Analysts predict that the Bank may hold rates at current levels through the summer, barring any dramatic shifts in inflation or geopolitical developments.
This latest cut is seen as a strategic pivot, balancing between promoting growth and maintaining price stability in an increasingly fragile global economic environment.
