Bank of England Slashes Official Bank Rate to 4.25% on May 8, 2025
Bank of England Slashes Official Bank Rate to 4.25% on May 8, 2025
In a significant move for the UK’s monetary policy, the Bank of England announced on May 8, 2025, that its Monetary Policy Committee (MPC) has voted to adjust the official bank rate to 4.25%. The decision, revealed shortly after the MPC’s latest meeting, reflects ongoing efforts to navigate a complex economic landscape shaped by global trade uncertainties and domestic growth concerns. The announcement, made at 1:00 PM GMT, was widely anticipated by financial analysts, with markets having priced in a high probability of this outcome based on recent economic signals.
The MPC’s decision, finalized with a 5-4 vote, underscores a cautious yet proactive approach to monetary policy. Five members supported a 25-basis-point cut, while two advocated for a more aggressive 50-basis-point reduction, and two preferred maintaining the previous rate of 4.5%. This split highlights the delicate balance the Bank of England is striving to maintain amid fluctuating inflation and economic growth projections. The rate adjustment follows a series of cuts since August 2024, when the bank rate stood at 5.25%, signaling a shift toward easing monetary conditions to support economic activity.
Today’s announcement comes against the backdrop of global economic challenges, particularly the impact of U.S. tariffs introduced under President Donald Trump, which have heightened trade policy uncertainty. The Bank of England emphasized that the decision aims to bolster consumer confidence and mitigate the risk of a potential economic downturn. Inflation, currently at 2.6% as of March 2025, remains above the Bank’s 2% target, but a temporary dip in March provided a window for this adjustment. Economists predict further cuts may follow in 2025, potentially bringing the rate to 3.75% by year-end, depending on economic developments.
For UK borrowers, this change offers immediate relief, particularly for the 600,000 homeowners with tracker mortgages tied to the bank rate, who could see monthly repayments drop by approximately £29. However, those on fixed-rate mortgages will only feel the impact when renegotiating future deals. Savers, on the other hand, may face lower returns, with the average easy-access savings account currently yielding 3%. The Bank of England’s next meeting, scheduled for June 19, 2025, will provide further clarity on the trajectory of monetary policy as the UK navigates these economic headwinds.
