BoE Interest rate: Bank of England cuts rate to 4%

The bank’s Monetary Policy Committee has reduced the base rate by 0.35 percentage points to 4%. It’s the fifth reduction since August last year, when the rate started dropping from its recent high of 5.25%, and is the lowest rate since February 2023, when it was also 4%.

The drop should ease pressure on variable rate mortgage holders as well as home buyers, as cheaper deals should enter the market now the cost of borrowing is down.

There has been a slowdown in the UK jobs market and stagnant economic growth, with data from the Office for National Statistics (ONS) showing that the rate of UK unemployment increased to 4.7% in the three months to May – the highest level for four years.

And average earnings growth, excluding bonuses, slowed to 5% in the period to May to its lowest level for almost three years.

Bank of England Governor Andrew Bailey said earlier this month that the Bank would be prepared to cut rates if the jobs market showed signs of weakening. Furthermore, ONS data showed the UK economy contracted in both April and May, further putting pressure on policymakers to ease borrowing costs.

Matt Swannell, chief economic advisor to the EY Item Club, said a 0.25 percentage point cut was a sign of a “sluggish” economy.

Recent survey data, watched closely by economists, has indicated that firms are grappling with higher labour costs and wider geopolitical uncertainty weighing on investment plans, he said.

“With the MPC balancing signs of fragility in the labour market against evidence of lingering inflationary pressure, the committee will likely signal that further gradual interest rate cuts remain appropriate,” Mr Swannell predicted.

Sanjay Raja, senior economist for Deutsche Bank, said the economy has been “weaker than the MPC anticipated” since it last published a Monetary Policy Report in May.

Some policymakers are concerned by recent inflation data, with prices rising at the fastest rate in 15 months in June. Rising food inflation has put pressure on the overall rate in recent months.

The Bank of England’s interest rate since 2016

• May 2025 – 4.25%
• Feb 2025 – 4.50%
• Nov 2024 – 4.75%
• Aug 2024 – 5.00%
• Aug 2023 – 5.25%
• Jun 2023 – 5.00%
• May 2023 – 4.50%
• Mar 2023 – 4.25%
• Feb 2023 – 4.00%
• Dec 2022 – 3.50%
• Nov 2022 – 3.00%
• Sep 2022 – 2.25%
• Aug 2022 – 1.75%
• Jun 2022 – 1.25%
• May 2022 – 1.00%
• Mar 2022 – 0.75%
• Feb 2022 – 0.50%
• Dec 2021 – 0.25%
• Mar 2020 – 0.10%
• Mar 2020 – 0.25%
• Aug 2018 – 0.75%
• Nov 2017 – 0.50%
• Aug 2016 – 0.25% (had been 0.50% since March 2009)