The Bank of England has today decided to reduce the base rate by 25 basis points to 4.25%.
Back in March there was a huge amount of uncertainty in the air when the decision to hold the base rate was made. Since then there has been much for Bank of England governor, Andrew Bailey, to consider.
The main inflation measure, CPI, came down slightly to 2.6% in the 12 months to March 2025, but is still running above the magic target of 2%.
And of course, the Bank has to consider the performance of the UK economy, predicted by the OBR to only grow by 1% during 2025. The Spring Statement at the end of March was a mixed bag. On the downside, Government spending cuts to offset higher than expected borrowing; cuts to disability benefits; and an expected increase in household bills were offset by the announcement of a £3.25 billion transformation fund in public sector infrastructure and a boost for Defence spend.
At a global level, thankfully, the Monetary Policy Committee has had the chance to figure out just how the chaos of Donald Trump’s ‘Liberation Day’ tariffs’ have affected things since April 2nd, but it’s clear there could be a significant slowdown in trade.
All things considered, many lenders are already making reductions in their mortgage rates, which is welcome news, particularly for British homeowners and borrowers facing increasing energy and food costs through summer.
In a departure from the norm, the Bank of England delayed the release of its latest decision – by two minutes! It’s highly unusual to move away from the usual schedule of midday announcements but a two-minute silence to commemorate Victory in Europe Day this week, quite rightly, took precedence.
PLG Consultants
08th May 2025
