The Bank of England (BoE) lowered its main interest rate by 0.25 percentage points to 4.25% on Thursday. The decision revealed a rare split among policymakers, as concerns over global trade tensions and slowing economic growth influenced the move.
The central bank’s Monetary Policy Committee (MPC) voted 5-4 in favor of the cut. Two members, Swati Dhingra and Alan Taylor, called for a deeper reduction of 0.5 percentage points. In contrast, Chief Economist Huw Pill and external member Catherine Mann preferred to keep rates unchanged.
The BoE warned that rising tariffs in the U.S. and elsewhere could slow global and UK economic growth and lower inflation in Britain. However, it emphasized that the future economic outlook remains uncertain.
Market Reaction
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Stocks: The FTSE 100 index trimmed gains but remained up 0.3%.
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Currency: The pound strengthened slightly against the dollar, rising 0.2% to $1.3320.
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Bonds: Yields on two-year gilts climbed 7 basis points to 3.88%. Markets now see less than a 20% chance of another cut in June and expect around 57 basis points in total cuts by the end of the year.
Expert Commentary
Philip Shaw, Chief Economist, Investec
“It’s no surprise the committee voted to lower rates, but it was unexpected that Huw Pill wanted to keep rates steady. That might reduce speculation of another cut in June. We expect the next cut in August.”
Luke Bartholomew, Deputy Chief Economist, abrdn
“The committee is deeply divided on how to respond to current economic shocks. This makes it harder for the Bank to signal its future plans. With guidance remaining cautious, a June cut seems less likely. We still expect at least two more cuts this year.”
Andrew Wishart, Senior UK Economist, Berenberg
“The vote was more hawkish than expected, with two members opposing the cut, likely due to concerns about strong market expectations for aggressive easing and rising core inflation. Still, the Bank’s message remained cautious, suggesting no rush for faster cuts.”
George Brown, Senior Economist, Schroders
“Today’s decision wasn’t a surprise, but the BoE likely has less room to cut than markets think. While tariffs may help reduce goods prices slightly, the UK faces challenges like low productivity and strong wage growth, which could keep inflation high.”
Jeremy Batstone-Carr, Strategist, Raymond James
“The BoE is signaling that more cuts could come later, even as short-term inflation may rise. We may not see another move until the autumn.”
Julius Bendikas, Head of European Economics, Mercer
“The MPC is walking a fine line as inflation and wages stay high. Global trade issues will likely drag on growth and prices. We expect rates to fall further, potentially reaching 3.5% or lower by 2026.”
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