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Informist, Thursday, Aug. 7, 2025

--Bank of England cuts bank rate by 25 bps to 4.00%

--Bank of England: MPC voted 5-4 to lower bank rate by 25 bps

MUMBAI - The Bank of England's Monetary Policy Committee Thursday lowered its bank rate by 25 basis points to 4.00%. The decision was, however, not unanimous, with four of the nine members voting in favour of leaving the bank rate unchanged at 4.25%.

The outcome was in line with market expectation. Pound sterling rose after the Bank of England's decision. The currency was up 0.4% after the decision against a 0.1% rise before the decision. This is the fifth time the Bank of England has cut interest rates in 12 months. It had left the bank rate unchanged at 4.25% in June.

"The path of disinflation in underlying domestic price and wage pressures has generally continued, albeit to different degrees. Twelve-month CPI inflation increased to 3.5% in 2025 Q2 (Apr-Jun), owing to developments in energy, food and administered prices," the central bank said in its statement. "Pay growth remains elevated, but has declined further recently, and is still expected to slow significantly over the rest of the year."

The central bank forecast CPI inflation to increase slightly to 4.0% in September but fall back towards the 2% target. The Monetary Policy Committee remains alert to the risk that this temporary increase in inflation could put additional upward pressure on the wage and price-setting process, the statement said. "Overall, the MPC judges that the upside risks around medium-term inflationary pressures have moved slightly higher since May."

Inflation in the UK rose to 3.6% in June from 3.4% in May, while the unemployment rate picked up to 4.7% in the three months to May, from 4.6% in the previous three-month period. GDP growth in the UK has remained subdued along with a gradual loosening in the labour market, the statement said. "A margin of slack is judged to have emerged in the economy. Downside domestic and geopolitical risks around economic activity remain, although trade policy uncertainty has diminished somewhat," it said.

The central bank said the timing and pace of future reductions in the restrictiveness of monetary policy will depend on the extent to which underlying disinflationary pressures continue to ease. "Monetary policy is not on a pre-set path, and the Committee will remain responsive to the accumulation of evidence," the statement said.  End

Reported by Shubham Rana

Edited by Tanima Banerjee

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