The Bank of England's (BoE) Monetary Policy Committee (MPC) has voted to lower the benchmark bank rate by 0.25 percentage points to 4.25 per cent, marking a cautious step towards easing policy amid ongoing progress on disinflation.
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This decision, announced on May 08, was passed by a narrow majority of 5-4. While two members advocated for a more significant 0.5 percentage point cut to 4 per cent, and two others argued to keep the rate unchanged at 4.5 per cent.&nbsp;
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The cut had been widely expected, especially after a slowdown in price rises, with inflation cooling to 2.6 per cent in the twelve months to March (from 2.8 per cent in February), as energy prices have retreated and the restrictive monetary stance has helped contain second-round inflationary effects.
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Despite the recent decline in inflation, the MPC remains cautious, stating that interest rates will need to stay in restrictive territory to guard against any persistent inflation pressures. The committee noted that inflationary risks could still shift in either direction, with global trade uncertainties and tariff-related volatility contributing to market fluctuations.
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&ldquo;We expect an increase in inflation this year. It is likely to rise temporarily to 3.7 per cent, partly because of higher energy prices. Inflation is expected to fall back to the 2 per cent target after that&hellip;There is also a lot of uncertainty from global developments, partly because of changes in global trade policies. We are assessing what this could mean for UK inflation closely,&rdquo; said BoE Governor Andrew Bailey.
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&ldquo;We need to be confident that inflation will remain low and stable in a lasting way. We will decide carefully how much further and how fast we can cut interest rates,&rdquo; he added.
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<h2>UK economy's health check</h2>
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The UK economy has shown signs of slowing growth, with GDP growth decelerating since mid-2024 and the labour market loosening. Wage growth, though still elevated, is expected to decline sharply later in the year. Energy prices have fallen, but increases earlier in the year are still expected to push inflation back up to 3.5 per cent by the third quarter of 2025 before easing once more.
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The underlying GDP growth is expected to have been around zero in 2025 Q1, well below the central bank&rsquo;s projection for headline growth of 0.6 per cent. The S&amp;P Global UK composite output PMI declined significantly in April, suggesting downside risks around the near-term outlook. Household spending growth has remained subdued over recent quarters, although real incomes have risen quite strongly such that the saving ratio increased to 11.6 per cent in 2024 Q4, its highest level since the pandemic.
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The country&rsquo;s employment growth has also softened recently, and the labour market has continued to loosen. The ratio of vacancies to unemployment has fallen further and is now judged to be below its equilibrium level.
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The central bank's May Report sets out two illustrative scenarios. In one scenario, there could be weaker supply and more persistence in domestic wages and prices, including from second-round effects related to the near-term increase in CPI inflation. In another scenario, inflationary pressures could ease more quickly owing to greater or longer-lasting weakness in demand relative to supply, in part reflecting uncertainties globally and domestically.
&nbsp;
The committee emphasised that monetary policy is not on a preset path and will be responsive to changes in the economic landscape.
&nbsp;
The future decisions on interest rates will depend on how inflation and the economy evolve, with the goal of returning inflation to the 2 per cent target in the medium term, the committee said in a statement.
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<h2>Who will it help?</h2>
&nbsp;
The Bank of England&rsquo;s recent 25-basis-point interest rate cut is set to benefit homeowners, particularly those looking to buy or remortgage. With a significant portion of UK homeowners on fixed-rate mortgages, the rate reduction is beneficial for those whose fixed-rate terms are ending in 2025, as it could lead to cheaper mortgage deals. While the cut won&rsquo;t impact those with existing fixed-rate mortgages, experts say it may help stimulate the housing market by improving affordability and providing lenders with room to compete, particularly among first-time buyers.
&nbsp;
In addition to this, the rate cut is also expected to benefit consumers and businesses. Borrowers with credit cards and personal loans may see lower interest rates, depending on their credit history. For businesses, particularly small and medium-sized enterprises, lower rates could make borrowing cheaper, providing relief after recent cost increases like the national minimum wage hike. With reduced borrowing costs, firms may have more cash for investment, potentially boosting consumer confidence and spending, helping the UK economy recover.

Business & Economy: Despite the recent decline in inflation, the MPC remains cautious, stating that interest rates will need to stay in restrictive territory

The Bank of England's (BoE) Monetary Policy Committee (MPC) has voted to lower the benchmark bank rate by 0.25 percentage points to 4.25 per cent, marking a cautious step towards easing policy amid ongoing progress on disinflation. This decision, announced on May 08, was passed by a narrow majority of 5-4. While two members advocated for a more significant 0.5 percentage point cut to 4 per cent, and two others argued to keep the rate unchanged at 4.5 per cent. The cut had been widely expected, especially after a slowdown in price rises, with inflation cooling to 2.6 per cent in the twelve months to March (from 2.8 per cent in February), as energy prices have retreated and the restrictive monetary stance has helped contain second-round inflationary effects. Despite the recent decline in inflation, the MPC remains cautious, stating that interest rates will need to stay in restrictive territory to guard against any persistent inflation pressures. The committee noted that inflationary risks could still shift in either direction, with global trade uncertainties and tariff-related volatility contributing to market fluctuations. “We expect an increase in inflation this year. It is likely to rise temporarily to 3.7 per cent, partly because of higher energy prices. Inflation is expected to fall back to the 2 per cent target after that…There is also a lot of uncertainty from global developments, partly because of changes in global trade policies. We are assessing what this could mean for UK inflation closely,” said BoE Governor Andrew Bailey. “We need to be confident that inflation will remain low and stable in a lasting way. We will decide carefully how much further and how fast we can cut interest rates,” he added. UK economy's health check The UK economy has shown signs of slowing growth, with GDP growth decelerating since mid-2024 and the labour market loosening. Wage growth, though still elevated, is expected to decline sharply later in the year. Energy prices have fallen, but increases earlier in the year are still expected to push inflation back up to 3.5 per cent by the third quarter of 2025 before easing once more. The underlying GDP growth is expected to have been around zero in 2025 Q1, well below the central bank’s projection for headline growth of 0.6 per cent. The S&P Global UK composite output PMI declined significantly in April, suggesting downside risks around the near-term outlook. Household spending growth has remained subdued over recent quarters, although real incomes have risen quite strongly such that the saving ratio increased to 11.6 per cent in 2024 Q4, its highest level since the pandemic. The country’s employment growth has also softened recently, and the labour market has continued to loosen. The ratio of vacancies to unemployment has fallen further and is now judged to be below its equilibrium level. The central bank's May Report sets out two illustrative scenarios. In one scenario, there could be weaker supply and more persistence in domestic wages and prices, including from second-round effects related to the near-term increase in CPI inflation. In another scenario, inflationary pressures could ease more quickly owing to greater or longer-lasting weakness in demand relative to supply, in part reflecting uncertainties globally and domestically. The committee emphasised that monetary policy is not on a preset path and will be responsive to changes in the economic landscape. The future decisions on interest rates will depend on how inflation and the economy evolve, with the goal of returning inflation to the 2 per cent target in the medium term, the committee said in a statement. Who will it help? The Bank of England’s recent 25-basis-point interest rate cut is set to benefit homeowners, particularly those looking to buy or remortgage. With a significant portion of UK homeowners on fixed-rate mortgages, the rate reduction is beneficial for those whose fixed-rate terms are ending in 2025, as it could lead to cheaper mortgage deals. While the cut won’t impact those with existing fixed-rate mortgages, experts say it may help stimulate the housing market by improving affordability and providing lenders with room to compete, particularly among first-time buyers. In addition to this, the rate cut is also expected to benefit consumers and businesses. Borrowers with credit cards and personal loans may see lower interest rates, depending on their credit history. For businesses, particularly small and medium-sized enterprises, lower rates could make borrowing cheaper, providing relief after recent cost increases like the national minimum wage hike. With reduced borrowing costs, firms may have more cash for investment, potentially boosting consumer confidence and spending, helping the UK economy recover.

Bank of England reduces interest rates to 4.25% as tariffs hit growth

Britain's economy bounced back in August, official data showed Friday, boosting the new Labour government ahead of its maiden budget later in October.

Gross domestic product grew 0.2 per cent in the reported month compared with July, when output stalled, the Office for National Statistics said in a statement.

The rise in economic growth was in line with analysts' expectations after GDP flatlined in June and July.

It also provides a timely boost to the new government, which has put growth expansion at the top of its priority list.

"It's welcome news that growth has returned to the economy," said Finance Minister Rachel Reeves, who will present the budget on October 30.

Prime Minister Keir Starmer's Labour party won power at the start of July, ending 14 years of Conservative rule.

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ONS director of economic statistics Liz McKeown said that while all the main sectors of the economy grew in August, "the broader picture is one of slowing growth in recent months, compared to the first half of the year."

<h2>- 'Mild slowdown' -</h2>

Revised official growth data revealed last month that Britain's economy grew less than initially estimated in the second quarter.

Britain's economy had grown 0.7 per cent in the first quarter following a shallow and short-lived recession in the second half of last year.

The uptick in economic growth in August has lent some support to expectations that "a mild slowdown in GDP growth in the second half of this year is more likely than another recession," said Ashley Webb, UK economist at research group Capital Economics.&nbsp;

Recent data has also showed Britain's state debt rising to 100 per cent of annual GDP -- increasing the likelihood of biting tax rises in Labour's budget, according to analysts.

"The gloom surrounding the economy has been hard to shake", said Lindsay James, investment strategist at Quilter Investors.

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"Much of this is due to Labour's rhetoric as they attribute difficult tax and spending decisions to their predecessors," she added.

Reeves has pledged to impose "iron discipline" over public finances to claw back what she says is a £22-billion ($29-billion) black hole inherited from the previous Conservative government.

Starmer has warned Britons that the budget announcement will be "painful", with tax rises and spending cuts expected.

The government has already faced criticism from all sides over scrapping a winter fuel-benefit scheme for 10 million pensioners.

Disclaimer: This story has been published from a news agency feed with minimal edits to adhere to WION's style guide. The headline may have been changed to better reflect the content of the story or to make it more suitable for WION audience.

Britain's economy bounced back in August, official data showed Friday, boosting the new Labour government ahead of its maiden budget later in October. Gross domestic product grew 0.

Britain's economy bounced back in August, official data showed Friday, boosting the new Labour government ahead of its maiden budget later in October. Gross domestic product grew 0.2 per cent in the reported month compared with July, when output stalled, the Office for National Statistics said in a statement. The rise in economic growth was in line with analysts' expectations after GDP flatlined in June and July. It also provides a timely boost to the new government, which has put growth expansion at the top of its priority list. "It's welcome news that growth has returned to the economy," said Finance Minister Rachel Reeves, who will present the budget on October 30. Prime Minister Keir Starmer's Labour party won power at the start of July, ending 14 years of Conservative rule. Also Read | Noel Tata, half-brother of late Ratan Tata, appointed chairman of Tata Trusts ONS director of economic statistics Liz McKeown said that while all the main sectors of the economy grew in August, "the broader picture is one of slowing growth in recent months, compared to the first half of the year." - 'Mild slowdown' - Revised official growth data revealed last month that Britain's economy grew less than initially estimated in the second quarter. Britain's economy had grown 0.7 per cent in the first quarter following a shallow and short-lived recession in the second half of last year. The uptick in economic growth in August has lent some support to expectations that "a mild slowdown in GDP growth in the second half of this year is more likely than another recession," said Ashley Webb, UK economist at research group Capital Economics. Recent data has also showed Britain's state debt rising to 100 per cent of annual GDP -- increasing the likelihood of biting tax rises in Labour's budget, according to analysts. "The gloom surrounding the economy has been hard to shake", said Lindsay James, investment strategist at Quilter Investors. Also Read | US election terror attack plot suspect Nasir Ahmad Tawhedi once worked for CIA "Much of this is due to Labour's rhetoric as they attribute difficult tax and spending decisions to their predecessors," she added. Reeves has pledged to impose "iron discipline" over public finances to claw back what she says is a £22-billion ($29-billion) black hole inherited from the previous Conservative government. Starmer has warned Britons that the budget announcement will be "painful", with tax rises and spending cuts expected. The government has already faced criticism from all sides over scrapping a winter fuel-benefit scheme for 10 million pensioners. Disclaimer: This story has been published from a news agency feed with minimal edits to adhere to WION's style guide. The headline may have been changed to better reflect the content of the story or to make it more suitable for WION audience.

UK economy bounced back in August with a boost to new labour government

According to a report, Britain needs an extra one trillion pounds ($1.3 trillion) of investment over the next decade to achieve economic growth.

New British Prime Minister Keir Starmer said he wanted the economy to achieve annual growth of 2.5 per cent when campaigning in the run-up to July 4's election - a rate Britain has not regularly reached since before the 2008 financial crisis.

According to a report by the UK financial services lobby group Capital Markets Industry Taskforce, an annual growth rate of 3 per cent would necessitate an extra investment of 100 billion pounds a year over the coming decade, especially in energy, housing and venture capital.

The investment could come out of the six trillion pounds in long-term capital in Britain's pensions and insurance sector, said Nigel Wilson, the report's lead author and former boss of Legal &amp; General, in a dialogue with Reuters.

"We've underinvested in the UK for such a long time, there's a massive gap between the other G7 countries and ourselves," he said.

"We have the long-term capital in the UK, it needs to be reallocated."

The British economy needs an extra 50 billion pounds each year of energy investment as it aims to meet net zero targets, 30 billion pounds in housing, and 20-30 billion in venture capital, the report said.

The government should consider incentives to investments, such as reducing taxes on shares for retail investors, the report added.

UK pensions have a "significantly lower" allocation to domestic and unlisted equities compared to most developed market pension systems around the world, according to a separate report published on Friday by think tank New Financial.

UK pensions could as much as double their allocations and still be in line with the pensions industry in other advanced markets, the report said.

While attempting to increase UK pensions investment in domestic startups, the UK government has called for a review of Britain's pension system.

According to a report, Britain needs an extra one trillion pounds ($1.3 trillion) of investment over the next decade to achieve economic growth. New British Prime Minister Keir Starmer said he wanted the economy to achieve annual growth of 2.

According to a report, Britain needs an extra one trillion pounds ($1.3 trillion) of investment over the next decade to achieve economic growth. New British Prime Minister Keir Starmer said he wanted the economy to achieve annual growth of 2.5 per cent when campaigning in the run-up to July 4's election - a rate Britain has not regularly reached since before the 2008 financial crisis. According to a report by the UK financial services lobby group Capital Markets Industry Taskforce, an annual growth rate of 3 per cent would necessitate an extra investment of 100 billion pounds a year over the coming decade, especially in energy, housing and venture capital. The investment could come out of the six trillion pounds in long-term capital in Britain's pensions and insurance sector, said Nigel Wilson, the report's lead author and former boss of Legal & General, in a dialogue with Reuters. "We've underinvested in the UK for such a long time, there's a massive gap between the other G7 countries and ourselves," he said. "We have the long-term capital in the UK, it needs to be reallocated." The British economy needs an extra 50 billion pounds each year of energy investment as it aims to meet net zero targets, 30 billion pounds in housing, and 20-30 billion in venture capital, the report said. The government should consider incentives to investments, such as reducing taxes on shares for retail investors, the report added. UK pensions have a "significantly lower" allocation to domestic and unlisted equities compared to most developed market pension systems around the world, according to a separate report published on Friday by think tank New Financial. UK pensions could as much as double their allocations and still be in line with the pensions industry in other advanced markets, the report said. While attempting to increase UK pensions investment in domestic startups, the UK government has called for a review of Britain's pension system.

Report reveals Britain requires an additional $1.3 trillion investment to fuel economic growth

British unemployment has held at a 45-year low, official data showed Tuesday, despite headwinds from Brexit and the slowing global economy.

The unemployment rate remained at 3.8 per cent in the three months to April -- the lowest level since the final quarter of 1974, the Office for National Statistics (ONS) said in a statement.

The reading was unchanged from the rate in the quarter to March and matched market expectations.

"All in all, there's very little here to suggest any weakness" in the labour market, said analyst David Cheetham at online trading firm XTB.

However, he sounded a note of caution about the impact of Brexit and the slowing global economy.

"The overall picture for the UK economy remains one that is far from thriving and looks to be simply treading water, to be honest," Cheetham said.

"But given the dual headwinds of ongoing political uncertainty and a slowing global economy, the current level of activity could arguably be viewed as about as good as could be expected under these circumstances."

Official data Monday showed UK gross domestic product contracted 0.4 per cent in April on a slump in manufacturing caused largely by Brexit uncertainty.

British unemployment has held at a 45-year low, official data showed Tuesday, despite headwinds from Brexit and the slowing global economy. The unemployment rate remained at 3.

British unemployment has held at a 45-year low, official data showed Tuesday, despite headwinds from Brexit and the slowing global economy. The unemployment rate remained at 3.8 per cent in the three months to April -- the lowest level since the final quarter of 1974, the Office for National Statistics (ONS) said in a statement. The reading was unchanged from the rate in the quarter to March and matched market expectations. "All in all, there's very little here to suggest any weakness" in the labour market, said analyst David Cheetham at online trading firm XTB. However, he sounded a note of caution about the impact of Brexit and the slowing global economy. "The overall picture for the UK economy remains one that is far from thriving and looks to be simply treading water, to be honest," Cheetham said. "But given the dual headwinds of ongoing political uncertainty and a slowing global economy, the current level of activity could arguably be viewed as about as good as could be expected under these circumstances." Official data Monday showed UK gross domestic product contracted 0.4 per cent in April on a slump in manufacturing caused largely by Brexit uncertainty.

UK unemployment rate holds at 45-year low

Britain's economy cooled in the three months to November, expanding at its weakest pace in six months as factories suffered from tough global trade conditions ahead of Brexit, official data showed on Friday.

Gross domestic product in the three months to November was 0.3 per cent higher than in the previous three-month period, down from growth of 0.4 per cent in the three months to October and matching the consensus of a Reuters poll of economists.

Manufacturers suffered their longest period of monthly falls in output since the financial crisis, hurt by weaker overseas demand, the Office for National Statistics said.

Worries about the global economy have been mounting due to concerns about a trade war between the United States and China. Figures from Germany and France earlier this week similarly showed falling industrial output.

Britain's economic growth in the three months to November was driven mostly by the dominant services sector, as well as the construction industry.

The figures fit with business and consumer surveys that suggest the economy is slowing sharply after robust growth of 0.6 percent in the third quarter of the year, reflecting growing uncertainty ahead of Britain's planned departure from the European Union, as well as global jitters.

Britain is due to leave the European Union on March 29 and whether businesses will still be able to trade without disruption to cross-border supply chains remains unclear.

The future of the deal which Prime Minister Theresa May has agreed in principle with the EU hangs in the balance ahead of a parliamentary vote which will take place on Tuesday.

May is widely expected to lose and this would leave open the prospect of Britain leaving the EU without any transitional arrangements to smooth the economic shock.

Calls for a second referendum - which May has rejected - are growing.

Friday's figures showed that compared with a year earlier, the economy stood 1.4 per cent larger. In November alone, it expanded 0.2 per cent, compared with forecasts for a rise of 0.1 per cent.

The data are broadly in line with the Bank of England's view that the economy is likely to have grown around 0.2 per cent over the fourth quarter of 2018.

Britain's economy slowed after the June 2016 Brexit vote, its growth rate slipping from top spot among the Group of Seven group of rich nations to mid-table or lower.

Consumers in particular were squeezed by the jump in inflation which followed the pound's tumble after the referendum, especially as wages have failed to keep up.

That said, an unusually warm summer in mid-2018 encouraged many to splash out on drinks and pub and restaurant visits.

But retail sales data suggests consumers reined in spending over Christmas.

Earlier this week closely watched purchasing managers' surveys pointed to fourth-quarter growth of around 0.1 per cent in Britain, according to data firm IHS Markit which compiles the surveys.

Friday's data showed that Britain's services sector grew by 0.3 percent over the three months to November, while industrial output dropped by 0.8 per cent, the biggest decline since May 2017.

Looking at November alone, industrial output dropped 1.5 per cent on the year - the biggest fall since August 2013.

Separate figures showed Britain's goods trade deficit widened unexpectedly in November to 12.0 billion pounds from 11.9 billion pounds, worsened by the highest oil imports since September 2014.

Britain's economy cooled in the three months to November, expanding at its weakest pace in six months as factories suffered from tough global trade conditions ahead of Brexit, official data showed on Friday.

Britain's economy cooled in the three months to November, expanding at its weakest pace in six months as factories suffered from tough global trade conditions ahead of Brexit, official data showed on Friday. Gross domestic product in the three months to November was 0.3 per cent higher than in the previous three-month period, down from growth of 0.4 per cent in the three months to October and matching the consensus of a Reuters poll of economists. Manufacturers suffered their longest period of monthly falls in output since the financial crisis, hurt by weaker overseas demand, the Office for National Statistics said. Worries about the global economy have been mounting due to concerns about a trade war between the United States and China. Figures from Germany and France earlier this week similarly showed falling industrial output. Britain's economic growth in the three months to November was driven mostly by the dominant services sector, as well as the construction industry. The figures fit with business and consumer surveys that suggest the economy is slowing sharply after robust growth of 0.6 percent in the third quarter of the year, reflecting growing uncertainty ahead of Britain's planned departure from the European Union, as well as global jitters. Britain is due to leave the European Union on March 29 and whether businesses will still be able to trade without disruption to cross-border supply chains remains unclear. The future of the deal which Prime Minister Theresa May has agreed in principle with the EU hangs in the balance ahead of a parliamentary vote which will take place on Tuesday. May is widely expected to lose and this would leave open the prospect of Britain leaving the EU without any transitional arrangements to smooth the economic shock. Calls for a second referendum - which May has rejected - are growing. Friday's figures showed that compared with a year earlier, the economy stood 1.4 per cent larger. In November alone, it expanded 0.2 per cent, compared with forecasts for a rise of 0.1 per cent. The data are broadly in line with the Bank of England's view that the economy is likely to have grown around 0.2 per cent over the fourth quarter of 2018. Britain's economy slowed after the June 2016 Brexit vote, its growth rate slipping from top spot among the Group of Seven group of rich nations to mid-table or lower. Consumers in particular were squeezed by the jump in inflation which followed the pound's tumble after the referendum, especially as wages have failed to keep up. That said, an unusually warm summer in mid-2018 encouraged many to splash out on drinks and pub and restaurant visits. But retail sales data suggests consumers reined in spending over Christmas. Earlier this week closely watched purchasing managers' surveys pointed to fourth-quarter growth of around 0.1 per cent in Britain, according to data firm IHS Markit which compiles the surveys. Friday's data showed that Britain's services sector grew by 0.3 percent over the three months to November, while industrial output dropped by 0.8 per cent, the biggest decline since May 2017. Looking at November alone, industrial output dropped 1.5 per cent on the year - the biggest fall since August 2013. Separate figures showed Britain's goods trade deficit widened unexpectedly in November to 12.0 billion pounds from 11.9 billion pounds, worsened by the highest oil imports since September 2014.