The Bank of England cut its benchmark Bank Rate by 25bps to 4.5% in its February 2025 decision, as expected, marking the third rate cut since the start of its easing cycle in August of last year.
Bank of England delivers another 25 bps rate cut
The move comes amid growing concerns over the UK’s economic outlook, with policymakers aiming to provide support as growth remains fragile. All nine members of the Monetary Policy Committee (MPC) voted for a rate cut, compared to market expectations of an 8-to-1 split. Notably, two members, including known hawk Catherine Mann, pushed for a steeper 50bps reduction, highlighting the increasing urgency among some policymakers to counter slowing economic momentum.
Monetary easing is expected to proceed gradually
Despite the rate cut, the Bank reiterated that monetary easing is expected to proceed gradually this year, given persistent underlying inflationary pressures, particularly within the services sector. However, it acknowledged that economic activity has already underperformed expectations from its November projections, leading to a downward revision in its growth forecasts for the year. This shift suggests a more dovish recalibration of the risk balance between growth and inflation in the near term. With markets closely watching future policy moves, the Bank’s stance signals a cautious but responsive approach as it navigates the delicate trade-off between supporting economic recovery and maintaining price stability.
