Bank of England Cuts Interest Rates: What It Means for the Economy and Future Projections

Bank of England Cuts Interest Rates to 4% Amid Economic Balancing Act

On Thursday, August 7, 2025, the Bank of England cut its Bank Rate from 4.25% to 4%. The bank made this 25-basis-point cut with care and a steady pace. It aims to boost growth now while keeping prices in check.

Monetary Policy Committee Voting Split

The Monetary Policy Committee split its votes 5–4. Five members chose the cut. Four members preferred no change. This close vote shows that the members face a hard task. They try to weigh mixed signals from the UK economy.

Economic Context: Inflation, Jobs, and Growth

Inflation: The Consumer Price Index went up from 3.4% in May to 3.6% in June. Prices stay above the bank’s 2% goal.
Labor Market: The number of paid workers fell in seven of the last eight months. Unemployment edged up this year.
Economic Growth: The nation’s gross domestic product fell by 0.1% in May. The small fall shows weak growth.

Economists point to the labor market as a key factor. They see no single sign of a sharp job loss. Most job weakness appears in the hospitality field. That sector feels the effect of higher tax on wages and worker pay rolls.

Expert Forecasts on Future Rate Movements

Economists mostly see more rate cuts in the coming months.

Jack Meaning, chief UK economist at Barclays, sees further quarter-point cuts. He thinks the Bank Rate may fall to 3.5% by February 2026.
Ashley Webb, a UK economist at Capital Economics, expects even deeper cuts. She thinks rates could drop to 3.0% by 2026. Webb notes that as the labor market softens, wage growth and prices may slow to a 2% level.

Challenges Behind the Decision

The MPC looked at stubborn inflation and soft signals in jobs.
• The inflation numbers stay high and do not move quickly.
• Job numbers show slow decline, especially in sectors hit by new taxes and policy moves.
• Though fewer jobs are seen, the decline is not sharp enough to give a clear signal.

Summary

The Bank of England cut rates to 4% to push for growth amid steady inflation and a cooling jobs market. The close vote shows deep debate. Future data and bank talks will help us see how this balancing act moves on in the coming months.

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