On May 8, 2025, the Bank of England (BoE) reduced its main interest rate by 0.25 percentage points to 4.25%, marking the fourth consecutive quarter-point cut since August 2024. This decision was driven by concerns over global economic instability, particularly the impact of U.S. tariff policies. The BoE’s Monetary Policy Committee (MPC) was divided on the move, with two members advocating for a larger 0.5-point cut and two voting to maintain the current rate.
Governor Andrew Bailey emphasized a cautious approach to future rate changes, stating that rates are not on “autopilot” and underscoring the need for a gradual and careful response to economic uncertainties. Despite the MPC’s split vote, financial markets anticipate at least two more quarter-point cuts later this year, though concerns about persistent inflation may limit further reductions .
The BoE’s latest forecasts project UK GDP growth to slow by 0.3% over the next three years, with inflation expected to peak at 3.5% in Q3 2025 before returning to the 2% target by 2027 . The recent U.S.-UK trade deal, which reduces tariffs on UK exports such as cars and steel, was welcomed by the BoE as a positive development, though the overall economic outlook remains cautious.
