Bank of England slashes policy rate 25 basis points, in line with forecasts

ISTANBUL

The Bank of England on Thursday cut its benchmark interest rate by 25 basis points, matching market forecasts.

The benchmark bank rate currently stands at 4%, its lowest since March 2023.

The move marked the fifth rate cut since the bank began lowering borrowing costs last August.

"There has been substantial disinflation over the past two and a half years, following previous external shocks, supported by the restrictive stance of monetary policy," the bank said in a statement.

"That progress has allowed for reductions in Bank Rate over the past year. The Committee remains focused on squeezing out any existing or emerging persistent inflationary pressures, to return inflation sustainably to its 2% target in the medium term," it noted.

The bank stated that in general, albeit to varying degrees, the path of disinflation in underlying domestic price and wage pressures has persisted.

"Twelve-month CPI inflation increased to 3.5% in 2025 Q2, owing to developments in energy, food and administered prices. Pay growth remains elevated, but has declined further recently, and is still expected to slow significantly over the rest of the year. Services consumer price inflation has been broadly flat over recent months," it said.

The bank stressed that it continues to be "vigilant" about the extent to which easing pay pressures will feed through to consumer price inflation.

"CPI inflation is forecast to increase slightly further to peak at 4.0% in September. Inflation is expected to fall back thereafter towards the 2% target, although the Committee remains alert to the risk that this temporary increase in inflation could put additional upward pressure on the wage and price-setting process," it noted.

Underlying UK GDP growth has remained subdued, consistent with a continued, gradual loosening in the labor market, the bank said.

The bank also noted that while trade policy uncertainty has "somewhat" decreased, there are still adverse domestic and geopolitical risks associated with economic activity.

The decision was taken by the bank's Monetary Policy Committee on a close 5-4 vote.

Annual consumer inflation in the UK rose to 3.6% in June, its highest level since January 2024, up from 3.4% in May.