Bank of England MPC votes by a majority of 7–2 to reduce bank rate by 0.25%

The UK’s central bank has announced its third rate cut in just over six months. At its meeting ending on February 5, 2025, the Bank of England (BoE) MPC voted by a majority of 7–2 to reduce Bank Rate by 0.25 percentage points, to 4.5%. Two members preferred to reduce Bank Rate by 0.5 percentage points, to 4.25%.

BoE felt that in support of returning inflation sustainably to the 2% target, the Committee judges that there has been sufficient progress on disinflation in domestic prices and wages to reduce the Bank Rate to 4.5% at this meeting.

Two members preferred a 0.5 percentage point reduction in Bank Rate, to 4.25%, although they had different views on inflation dynamics, the structural factors underpinning them, and future monetary policy.

Bank of England in a statement says – There has been substantial progress on disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations. That progress has allowed the MPC to withdraw gradually some degree of policy restraint while maintaining Bank Rate in restrictive territory to continue to squeeze out persistent inflationary pressures.

CPI inflation was 2.5% in 2024 Q4. Domestic inflationary pressures are moderating, but they remain somewhat elevated, and some indicators have eased more slowly than expected. Higher global energy costs and regulated price changes are expected to push up headline CPI inflation to 3.7% in 2025 Q3, even as underlying domestic inflationary pressures are expected to wane further. While CPI inflation is expected to fall back to around the 2% target thereafter, the Committee will pay close attention to any consequent signs of more lasting inflationary pressures.

However, GDP growth has been weaker than expected at the time of the November Monetary Policy Report, and indicators of business and consumer confidence have declined. GDP growth is expected to pick up from the middle of this year. “The Bank of England interest rate cut by a quarter point to 4.5% underscores fears of stagflation are real. The UK economy has been teetering on the edge of stagnation, with data suggesting little to no growth in the final quarter of 2024,” says Nigel Green, CEO of global financial advisory giant, deVere Group.