The Bank of England is expected to cut its key interest rate to 4.50% on February 6, 2025, due to stagnating economic growth and inflation pressures. This marks the third rate cut in six months.
The Bank of England (BoE), the central bank of the United Kingdom, is expected to lower its main interest rate to 4.50% on February 6, 2025, following a continued trend of cuts over the past six months. This anticipated move marks a reduction of a quarter of a percentage point, bringing the rate to its lowest level since mid-2023.
The decision comes amid ongoing inflationary pressures that remain above the BoE’s target. However, many economists believe the bank’s nine-member Monetary Policy Committee will focus on easing borrowing costs to stimulate economic growth, which has stagnated in recent months. Lower interest rates typically make mortgages and loans more affordable, and may influence the returns on savings accounts as well.
Until now, the bank has cut at alternate meetings, but a stagnating economy and declining employment argue for more urgent action.”
Andrew Wishart, senior U.K. economist at Berenberg Bank.
The Bank of England’s interest rate cuts follow a pattern established after inflation surged due to supply chain issues and the economic impact of Russia’s invasion of Ukraine, which pushed up energy prices. Since inflation rates have eased considerably, many central banks, including the U.S. Federal Reserve, have also started to cut rates.
While inflation has fallen significantly from previous highs, economic growth remains weak, which may influence the BoE’s decision to adjust rates. This marks a critical moment for financial markets as the BoE also releases economic forecasts and provides insights during Governor Andrew Bailey’s press briefing after the rate decision.
With inflation now at 2.5%, down from multi-decade highs, the bank is still focused on maintaining its target of 2% inflation over the coming years. The upcoming decision is poised to have wide-reaching implications for mortgages, loans, and the general economic landscape in the U.K.
