The Bank of England has lowered its benchmark interest rate from four percent to 3.75 percent following a close five to four vote by members of its Monetary Policy Committee. This decision marks the fourth reduction in 2025 as inflation shows signs of easing and economic growth remains sluggish.
Governor Andrew Bailey supported the rate cut, signaling a shift in his previous stance, while four committee members voted against the move, citing concerns that inflation risks have not yet fully diminished. The vote reflects the ongoing challenge faced by the Bank in balancing the need to support economic activity while ensuring that price growth remains under control.
The reduction in rates is expected to ease borrowing costs for homeowners with variable and tracker mortgages and provide some relief to businesses facing high financing expenses. At the same time, savers may see returns on deposits decline due to lower policy rates.
Financial markets responded with mixed reactions. The British pound strengthened slightly against major currencies, while government bond yields adjusted as investors assessed the implications of the Bank’s cautious approach. Analysts anticipate that future decisions on interest rates will continue to be closely contested as new economic data becomes available.
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