Bank of England cuts base rate to 4.25%

The Bank of England cuts interest rates from 4.5% to 4.25% - the lowest rate since May 2023

The Bank of England’s Monetary Policy Committee (MPC) voted 5 – 2 – 2 to cut its base rate to 4.25%, in a widely expected move.

Two members of the nine person committee voted for a larger 0.5% reduction, and two voted for no change. The move puts the base rate at its lowest for two years.

A lower rate is designed to boost spending by making borrowing, including mortgages, cheaper - but cutting rates means savers get lower returns

In a new forecast, the Bank also expects higher economic growth in the UK this year - but lower growth after that. Cutting rates was in part due to inflation being lower than expected in March, according to the Bank’s Governor Andrew Bailey. He added that inflation is expected to rise temporarily due to higher energy prices.

In its projections for the economy, the Bank said it expects UK economic growth to be stronger than previously thought this year. Its projections expect GDP to grow by 1% this year, 0.25% higher than previously predicted.

It did, however, downgrade its forecast for 2026 to 1.25% from 1.5% previously.

The next base rate decision from the MPC is expected on 19 June.

Falling rates have been changing investor behaviours.

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