Bank of England cuts interest rates to lowest level since May 2023

6 February 2025, 12:02 | Updated: 6 February 2025, 12:46

The Bank of England has cut the base rate of interest from 4.75% to 4.5%, the lowest level since May 2023.

The Bank of England has confirmed interest rates have been cut from 4.75 per cent to 4.5 per cent, its lowest level in 18 months.

Economists had expected the cut - which will bring cheaper mortgage payments for homeowners on variable deals.

Chancellor Rachel Reeves said the interest rate cut was "welcome news" but that she was still "not satisfied" with growth.

She said: "This interest rate cut is welcome news, helping ease the cost-of-living pressures felt by families across the country and making it easier for businesses to borrow to grow.

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"However, I am still not satisfied with the growth rate. Our promise in our Plan for Change is to go further and faster to kickstart economic growth to put more money in working people's pockets.

"That's why we are taking on the blockers to get Britain building again, ripping up unnecessary regulatory barriers and investing in our country to rebuild roads, rail and vital infrastructure."

The Bank's governor, Andrew Bailey, said: "It will be welcome news that we have been able to cut interest rates again today. We'll be monitoring the UK economy and global developments very closely and taking a gradual and careful approach to reducing rates further.

"Low and stable inflation is the foundation of a healthy economy and it's the Bank of England's job to ensure that."

He added Bailey there will be "bumps" in the road to bring down inflation.

He said: "We expect to be able to cut the Bank rate further as the disinflation process continues.

"But we will have to judge meeting by meeting how far and how fast.

"We live in an uncertain world and the road ahead will have bumps.

"We expect inflation to increase this year, to a peak of about 3.7% before returning to the 2% targets. We will set the Bank rate to ensure that it does so sustainably."

More cuts are expected in the coming years, the bank has indicated

Seven members of the central bank's nine-strong Monetary Policy Committee (MPC) voted to reduce the base rate.

Two members of the committee - Swati Dhingra and Catherine Mann - voted for a sharper reduction to 4.25%.

The Conservatives welcomed the cut to interest rates but said Labour's "disastrous Budget" would likely mean fewer rate cuts this year than expected.

Shadow chancellor Mel Stride said: "This will be welcome news for many families and businesses who have been hit hard by Labour's mismanagement. Sadly, their disastrous Budget is likely to mean fewer rate cuts this year than previously anticipated.

"Under new leadership, the Conservatives will back business and our nation of entrepreneurs to create jobs and wealth.

"That is the only way to grow our economy so everyone can have a more secure future."