The Bank of England (BoE) has announced a 0.25 percentage point reduction in its benchmark interest rate, lowering it to 4.5%. This move, marking the third rate cut since August 2024, aims to stimulate economic activity amid concerns over slowing growth and persistent inflation.
The BoE has adjusted its growth forecast for 2025, reducing it from 1.5% to 0.75%, citing economic uncertainties and inflation concerns. Inflation is projected to rise to 3.7% in the coming months before stabilizing around the 2% target.
The decision has received mixed reactions. Prime Minister Keir Starmer welcomed the rate cut, highlighting its potential benefits for borrowers with floating-rate mortgages. However, some analysts express concerns about the long-term implications of lower interest rates, including the risk of fueling inflation.
Governor Andrew Bailey emphasized that while the rate cut aims to support economic growth, future rate reductions will be approached cautiously. The BoE remains committed to maintaining price stability and will closely monitor economic developments to inform its monetary policy decisions.
