Bank of England Cuts Interest Rates to 4.5%
Thursday 6 February, 2025
In Bid to Support Economy the Bank of England has cuts the base interest rate to 4.5%
Lowest Base Rate Since June 2023
The Bank of England has announced today (06/02/2025) a reduction in its base interest rate from 4.75% to 4.5%, marking the lowest rate since June 2023. The decision was made by the Bank’s Monetary Policy Committee (MPC), which voted 7-2 in favour of the cut. The two dissenting members pushed for an even larger reduction to 4.25%, signalling ongoing concerns about economic growth and inflation.
Inflation Remains Above Target
The move follows a slight but unexpected dip in inflation, which fell from 2.6% to 2.5% in December. Despite this decrease, inflation remains above the Bank’s long-term target of 2%. Bank of England Governor Andrew Bailey has previously indicated that interest rates could be lowered further in the coming months if inflation continues to decline.
Impact on Borrowing and Saving
A lower interest rate is expected to make borrowing more affordable, encouraging spending and investment across businesses and households. However, it also means that savers may see reduced returns on their deposits. The Bank’s decision reflects a balancing act between stimulating economic activity and ensuring inflation remains under control.
As economic conditions evolve, all eyes will be on the Bank of England’s next steps and whether further rate adjustments will follow in the months ahead.
