Thu, 07 Aug 2025

Thu, 07 Aug 2025 Faisal Islam: Why has the Bank of England cut rates?

Rates are now at their lowest since March 2023 even though inflation is well above target.

* Despite inflation remaining above the target of 2%, the committee voted for a rate cut due to expectations that job market pressures will ease in the medium term.
* However, the decision was close and involved an unprecedented second vote.
* The Bank expects the economy to pick up from next quarter, partly due to the US trade deal, but notes that the global backdrop has weighed down on growth.
* Savings rates remain high as a proportion of the economy, with consumers holding back on spending despite rising pay.
* The Bank predicts a notable improvement in economic growth if savings rates decline and spending reverts to normal.
* Inflation remains a concern, particularly due to upcoming food price increases.
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