Bank of England Cuts Interest Rates as UK Faces Economic Challenges

The decision to reduce rates to 4.5% highlights concerns over sluggish growth and rising inflation projections.

The Bank of England unanimously voted to lower the base interest rate from 4.75% to 4.5%, with two members advocating for a larger 0.5% cut.
Despite the rate reduction, the Bank forecasts inflation will temporarily rise to 3.7% in the third quarter of 2025, driven by energy and regulated price increases.
UK GDP growth projections have been cut to 0.75% for 2025, reflecting economic weakness in the latter half of 2024, but slight recovery is expected in 2026.
Fixed-rate mortgages and reduced reliance on variable rates mean the economic impact of rate cuts is slower to materialize than in the past.
Critics suggest the rate cut may also ease pressure on government debt servicing costs and mortgage holders, raising questions about its alignment with inflation control priorities.