Interest rates LIVE: Bank of England poised to cut base rate by 0.25% (Image: Getty)
The Monetary Policy Committee (MPC) will meet today to determine whether the Base Rate will rise, fall, or remain the same.
Most experts anticipate a quarter-point reduction from 4.75% to 4.5%, continuing a series of cuts that began last summer. The base rate significantly impacts the cost of and loans and influences the banks offer on accounts.
The base rate peaked at 5.25% in late 2023, but policymakers reduced it to 4.75% throughout the following months. The Bank of England typically raises when inflation is high to curb spending and slow price increases.
With inflation now at a much lower rate of 2.5% annually, down from recent highs, and economic growth stagnating, many experts predict another rate cut to encourage spending and stimulate the economy.
However, recent data suggests inflation may start to rise again, though more gradually. A survey released on Wednesday revealed that cost inflation in the service sector, which includes industries from retail to finance, edged up in January.
While economists believe these signs of rising inflation won’t derail a rate cut today, they may make the Bank more cautious in its decisions at future meetings in March and May.
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UK interest rate timeline
The Bank of England’s base rate saw a sharp increase from near-zero levels in 2021 to peak at 5.25% in 2023.
As inflation showed signs of easing, were cut twice in 2024 – first to 5% in August, then to 4.75% in November.
UK interest rate timeline (Image: PA)
Bank will have to ‘walk tightrope’ when cutting interest rates later in year
Chris Arcari, an analyst at finance firm Hymans Robertson, said the Bank will have to “walk a tightrope” when it comes to more rate cuts later this year.
He said that while the economy currently leaves space for a “modest reduction”, the Bank will likely “adopt cautious messaging” about the future.
The rise in cost inflation partly concerns the effect of policies announced in the October Budget.
Chancellor Rachel Reeves raised contributions for companies in October.
The move was designed to give the Government more money to spend on public services like the NHS.
However, some companies have complained that it is pushing up costs and contributing to rising inflation.
Matthew Ryan, an analyst at finance firm Ebury, added that with economic growth stagnating but inflation rising, the Bank “will have to make a judgment call about which risk is likely to dominate over the course of the year”.
What is the Bank expected to do?
Most experts predict a quarter-point reduction to 4.5% today.
With inflation dropping to 2.5% and economic growth stagnating across the UK, a rate cut is expected to stimulate spending and boost the economy.
This follows the MPC’s decision to keep the central unchanged at 4.75% during its last meeting in December.
‘Downgraded’ economic forecasts could add more pressure on Bank to cut interest rates
With the UK’s growth forecasts for 2025 , there is growing pressure on the Bank of England to reduce in a bid to stimulate the economy.
However, while a rate cut might be on the horizon, experts warn that such a move may not provide the immediate relief some expect.
Alistair Douglas, CEO of TotallyMoney, said: “With UK growth forecasts downgraded to just 1% in 2025, the Government will be doing anything and everything in its power to get the economy on track. And that probably means that Rachel Reeves has been frantically phoning her ex-colleagues at the Bank of England to see if they can swing a rate cut this week. However, that alone is unlikely to have a seismic impact on consumer finances, with lenders already factoring cuts into their pricing, and banks slashing savings rates.”
He continued: “The good news is that the Chancellor is exploring longer-term solutions, including a £78 billion Oxford-Cambridge Growth Corridor, a new Heathrow runway, and a £20million investment in rocket-maker, Orbex. But the truth is that these big projects take time to launch, and to make an impact.”
Mr Douglas added: “In the meantime, businesses and employees will be feeling the pinch from employers’ National Insurance contribution hikes and frozen personal tax thresholds. And over the next few months, everything from energy and water, to phone and broadband bills will increase, while the government has also given the green light to council tax hikes of up to 10%.
“A more balanced approach would help the economy in the short-term, and give people more confidence in the government and its ability to turn things around.”
When will we know the Bank’s decision?
The Governor of the Bank of England typically presents their recommendation on whether to maintain, increase, or decrease the base rate a day before the official announcement.
This recommendation is then subject to a vote by the Bank’s Monetary Policy Committee (MPC), which is responsible for setting the rates.
As expected, the majority vote prevails, and in the event of a tie, the Governor casts the deciding vote.
The minutes of this month’s meeting and the final decision will be released at 12pm.
When will we know the Bank’s decision? (Image: Getty)
Good morning
Good morning, and welcome to our live blog, where we’ll bring you the latest on today’s base rate decision.