Bank of England Cuts Rates As Growth Concerns Mount

Bank of England Cuts Rates As Growth Concerns Mount

Thursday 6th February 2025 – 13:00 (GMT)

The Bank of England lowered its benchmark interest rate by 25 basis points to 4.5% at its February 2025 meeting, delivering its third cut since initiating its easing cycle last August. The move, which was widely anticipated by markets, came with a unanimous vote from the Monetary Policy Committee (MPC), diverging from expectations of an 8-1 split. Notably, two members, including traditionally hawkish Catherine Mann, pushed for a more aggressive 50 basis-point reduction, underscoring rising concerns over the fragility of the UK economy.

Despite reiterating that monetary easing would proceed at a measured pace, the Bank signalled a growing tilt towards supporting growth. It revised down its economic forecasts for the year, acknowledging that activity has already fallen short of its November projections. This suggests that policymakers see the risks of weaker growth increasingly outweighing the threat of persistent inflationary pressures, particularly in the services sector.

The decision is likely to exert downward pressure on sterling, as markets recalibrate expectations for the pace and depth of future rate cuts. The pound slipped against the dollar and euro in early trading, reflecting investor sentiment that the Bank may have to act more decisively to support the economy. With the Federal Reserve and European Central Bank yet to begin their own rate-cutting cycles, sterling’s yield disadvantage could widen, adding to depreciation pressures in the months ahead.