The Bank of England has cut Ƶ interest rates to 4.25%, following a split vote among policymakers.
The Bank’s nine-person Monetary Policy Committee (MPC) voted by a majority of five-four to reduce rates by 0.25 percentage points, bringing it down to the lowest level since May 2023.
Two members of the MPC, Swati Dhingra and Alan Taylor, wanted to push through a bigger 0.5 percentage point reduction to interest rates.
Another two members, Catherine L Mann and Huw Pill, preferred to keep rates unchanged at 4.5%.
The committee stressed that it remains “sensitive to heightened unpredictability in the economic environment” and that a “gradual and careful approach” to cutting rates was appropriate.
Ƶ economic growth is expected to be stronger than previously thought this year, but weaker over 2026 as the impact of tariffs on global trade takes its toll, according to new forecasts from the Bank of England.
The projections show gross domestic product (GDP) will average at 1% this year, marking an upgrade from the 0.75% growth predicted in the Bank’s last report in February.
This is largely due to growth over the first three months of 2025 being higher than the Bank had previously anticipated. But the forecast for 2026 has been downgraded to 1.25%, from 1.5% previously.
The Bank also cut its growth outlook for the world economy to 1.5% in 2026, from 2% previously, as new US tariffs and heightened uncertainty over global trade weigh on economic activity around the world.
The news was widely anticipated by business leaders and economists but some have said the Ƶ's central bank should have reduced rates further.
Professor Joe Nellis, an economic adviser at MHA, the accountancy and advisory firm, said the bank should have been bolder in its attempt to "kick some life into the economy".
"[The bank should have] actioned a double cut to 4%," he said. "Even with a major announcement this afternoon on Ƶ / US trade tariffs to add to the India deal earlier this week we don’t see any changes in the overall downward trajectory.
"The decision of the Monetary Policy Committee today to cut rates to 4.25% is another move in the ongoing battle for the Bank’s attention between inflation and growth— despite inflation consistently remaining above the Bank’s 2% target and expected to rise further, it is growth that is clearly their priority."
Nigel Green, the CEO of independent financial advisory and asset management company deVere Group, agrees the Bank of England should have "gone bigger" with rate cuts.
“With growth slowing, business confidence cracking, and the global economy facing renewed threats from President Donald Trump’s erratic trade policies, the bank’s caution risks becoming part of the problem,” he said.
“This decision smacks of hesitation at a time when speed and scale are what matter most."
Alpesh Paleja, deputy chief economist at the CBI, said the question now was whether "this gradualism" will persist.
"Disinflationary risks have intensified over the last couple of months: US tariffs pose a fresh headwind to growth, global oil prices have fallen and, at home, the labour market is cooling.
“But heightened uncertainty could keep the MPC from easing off on the brakes too much. Evolving global trade dynamics - and the potential for further restrictions - could affect Ƶ inflation in either direction. And the committee remain concerned about a decline in domestic supply capacity, which could put further pressure on prices.
“With so many moving parts in the global and domestic outlook, the committee may maintain a cautious stance.
"But with inflation risks increasingly tilting to the downside, a faster pace of rate cuts may become more palatable to a growing number of members.”
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