Bank of England cuts interest rates to 4.5%

This decision, made at the MPC's recent meeting ending on February 5, saw a majority vote of 7–2, with two members advocating for a deeper cut to 4.25 per cent.

The rate cut follows substantial progress in disinflation, thanks to easing external shocks and effective monetary policy over the last two years. The MPC aims to maintain the bank rate in a restrictive range to continue addressing inflationary pressures. Despite this progress, CPI inflation stood at 2.5 per cent in the fourth quarter of 2024, slightly above the target due to persistent domestic and global economic factors, the Committee said in a press release.

The UK's economic growth has been below expectations, with recent reports showing weakened consumer and business confidence. However, growth is anticipated to rebound from mid-2025, supported by a stabilising labour market and diminishing inflationary pressures. The MPC notes that while headline CPI inflation is projected to rise to 3.7 per cent in the third quarter of 2025 due to higher global energy costs and regulated price adjustments, it is expected to realign with the 2 per cent target subsequently.

In addressing both the immediate and medium-term economic outlook, the MPC has committed to a cautious approach towards further easing monetary policy. The committee highlighted the ongoing uncertainties in demand and supply dynamics, which could influence future policy decisions. The MPC emphasised its readiness to adjust the restrictiveness of monetary policy based on emerging economic evidence and will continue to monitor inflation risks closely. This decision underscores the committee's resolve to ensure that inflation returns to the target level sustainably in the medium term.

ALCHEMPro News Desk (DS)