Bank of England Cuts Bank Rate to 4.50% in First Reduction of 2025 as Growth Forecast Is Halved

The Bank of England reduced its Bank Rate by 25 basis points to 4.50% at its February 2025 Monetary Policy Committee meeting, delivering the first interest-rate cut of the new year and continuing the easing cycle that the committee had begun in the second half of 2024. The decision, set out in the MPC's monetary policy summary and minutes published on the Bank of England's website, was not unanimous.

The committee voted seven to two in favour of the 25 basis-point cut that brought Bank Rate to 4.50%. The two dissenting members advocated a larger 50 basis-point reduction that would have taken the rate to 4.25%.

GROWTH FORECAST REVISED DOWN

Accompanying the rate decision, the Bank halved its forecast for UK GDP expansion in 2025 from 1.5% to 0.75%.

INFLATION EXPECTED TO CLIMB BEFORE DECLINING

Consumer price inflation stood at 2.5% in the fourth quarter of 2024, against the Bank's 2% target. However, the MPC's updated projections indicate that CPI is expected to rise to 3.7% by the third quarter of 2025, driven by higher global energy costs and increases in regulated prices, before resuming a gradual path back towards the target thereafter.

The February decision leaves Bank Rate 75 basis points below its cycle peak of 5.25%.