BOE Lowers Interest Rates and Hints at More Cuts to Come

• The Bank of England (BOE) cut its main interest rate by 0.25 percentage points to 4.25% on Thursday, May 8, 2025.
• The minutes of the Bank's meeting showed the rate-setting committee was divided. Of the nine members, five voted to cut rates to 4.25%, two voted in favour of a larger reduction to 4%, and two voted for no change.
• "The Monetary Policy Committee is clearly very divided on how policy should respond to the many shocks currently hitting the economy. This is highly unusual and will make it hard for the Bank to send a clear signal to the market about the likely path of policy. But with the bank maintaining its guidance that further cuts will be 'gradual and careful', the chance of another cut in June probably has fallen significantly", said Luke Bartholomew, Deputy Chief Economist of Aberdeen London:
• Most recent U.K. inflation figures show prices rose 2.6% in the year to March. However, the rate is expected to jump following a series of household bill increases at the start of April, including energy and water prices.
• Inflation is expected to rise "temporarily" to 3.5% this year due to the bill increases before falling back due to lower oil and gas prices set to feed through in the coming months.
• That said, the Bank expects UK growth for the first three months of this year to be stronger than it originally forecast at 0.6%, boosted by U.S. firms stockpiling goods ahead of Trump's tariffs coming into effect. The official figures are set to be released next week. A boost in growth would be welcomed news to the government, which has made growing the economy its main priority to boost living standards.

(Source: Reuters & BBC)