Bank of England cuts rates to 4.5%
By Abigail Townsend
Date: Thursday 06 Feb 2025
(Sharecast News) - The Bank of England trimmed interest rates by a quarter point on Thursday, as widely expected.
The Monetary Policy Committee voted to cut the cost of borrowing to 4.5% by a majority of 7 to 2. The two external members who voted against - Swati Dhingra and Catherine Mann - argued instead for a bigger 50bps reduction.
The MPC last reduced rates in November.
In the minutes accompanying the decision, the MPC noted that while domestic inflationary pressures were "moderating", higher global energy costs would likely see consumer price index inflation rising "quite sharply" to reach 3.7% by the third quarter.
Inflation is currently 50bps above the BoE's long-term target of 2%.
But the MPC also acknowledged that GDP growth had been weaker-than-expected in November, with declining indicators for both business and consumer confidence.
It forecast GDP to have fallen by 0.1% in the fourth quarter of 2024, and now expects it to grow by just 0.75% in the current year. That compares to its previous 2025 GDP forecast for growth of 1.5%.
Overall the BoE therefore concluded that a "gradual and careful approach to the further withdrawal of monetary policy restraint" remained appropriate.
Most analysts expect between two and three more cuts this year, which would take the cost of borrowing down to around 3.75%.
Andrew Bailey, governor of the BoE, said: "We will be monitoring the UK economy and global developments very closely, and taking a gradual and careful approach to reducing rates further.
"Low and stable inflation is the foundation of a healthy economy and it's the BoE's job to ensure that."
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "A sigh of relief is greeting this rate cut, given how long painful borrowing costs have lingered. But the move and the outlook from the bank underlines the challenges facing the UK.
"The risks of stagflation are stark. Inflation remains above the Bank's 2% target, and price pressures are piling up. But the economy is stagnating and business confidence has taken a knock."
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN