Bank of England cuts interest rates
The Bank of England’s Monetary Policy Committee (MPC) has voted to cut interest rates.
At its meeting ending on Thursday (6 August), the MPC voted by a majority of 5–4 to reduce Bank Rate by 0.25 percentage points, to 4%, rather than maintaining it at 4.25%.
“There has been substantial disinflation over the past two and a half years, following previous external shocks, supported by the restrictive stance of monetary policy,” the MPC said in an accompanying statement.
“That progress has allowed for reductions in Bank Rate over the past year. The Committee remains focused on squeezing out any existing or emerging persistent inflationary pressures, to return inflation sustainably to its 2% target in the medium term.”
The MPC noted that the path of disinflation in underlying domestic price and wage pressures has generally continued, albeit to different degrees.
Twelve-month CPI inflation increased to 3.5% in 2025 Q2, owing to developments in energy, food and administered prices. Pay growth remains elevated, but has declined further recently, and is still expected to slow significantly over the rest of the year. Services consumer price inflation has been broadly flat over recent months.
The Committee said it continues to be vigilant about the extent to which easing pay pressures will feed through to consumer price inflation.
“CPI inflation is forecast to increase slightly further to peak at 4.0% in September. Inflation is expected to fall back thereafter towards the 2% target, although the Committee remains alert to the risk that this temporary increase in inflation could put additional upward pressure on the wage and price-setting process.
“Overall, the MPC judges that the upside risks around medium-term inflationary pressures have moved slightly higher since May.”
