Bank Of England Slashes Interest Rate To 4.5%

However, the economic outlook remains fragile.

The Bank revised its growth forecast downward, warning that the UK will narrowly avoid a formal recession.

It also downgraded its estimate of the economy’s ability to generate income, signaling prolonged economic weakness.

In a further setback for the government, the Bank dismissed the Chancellor’s latest economic growth plans, stating they would have “no impact on GDP growth in its forecast horizon.”

The decision will have mixed consequences for consumers.

Borrowers will benefit from lower mortgage and loan costs, but savers could see declining returns.

Savings expert Anna Bowes advised: “Savers should review their accounts and act before rates drop further.

“You could get four times the return if you switch to a better account.”

MPC

Meanwhile, the Monetary Policy Committee sets policy to maintain 2% inflation while supporting growth and jobs.

On 5 February 2025, the MPC voted 7-2 to cut the bank rate to 4.5%, with two members favoring a deeper cut to 4.25%.

These details are retrieved by PUNCH Online in a Thursday publication on the Bank of England website.

Inflation fell to 2.5% in Q4 2024 but is expected to temporarily rise to 3.7% in Q3 2025 due to energy costs before stabilizing.

GDP growth has weakened, confidence has declined, and productivity remains sluggish. The MPC is cautiously easing policy while monitoring inflation risks.

Global uncertainties also loom over the UK economy, with the Bank highlighting potential risks from U.S. trade policies under Donald Trump.

While these tariffs have not yet been factored into economic models, they pose a significant threat to future growth.

Multiple financial experts noted that as the Bank of England signals a cautious but steady approach to further rate cuts, markets and households brace for an evolving economic landscape.