Bank of England Reduces Base Interest Rate to 4%
Wednesday 6 August, 2025
In a narrowly divided decision, the Bank of England’s Monetary Policy Committee (MPC) has lowered the base interest rate by 0.25 percentage points to 4 per cent. The vote, concluding on 6 August 2025, passed by a slim majority of 5–4, signalling the fifth reduction in a year from a 16-year high of 5.25 per cent. The cut, announced today, brings the Bank Rate to its lowest level since March 2023.
Why the Bank made the decision
The MPC justified the reduction on grounds of steady disinflation aided by prior policy restraint and growing slack in the economy. Twelve-month CPI inflation, while above the 2 per cent target, has moderated, with the Committee noting a slowdown in domestic price and wage pressures.
Despite inflation climbing to around 3.6 per cent, it is expected to peak at approximately 4 per cent in September before easing towards target in the medium term. The MPC emphasised the benefits of a gradual and careful approach as the restrictiveness of monetary policy diminishes and pledged to remain responsive to incoming data.
Implications for the public and professionals
This decision will be of interest to many, particularly homeowners with variable-rate or tracker mortgages and savers. While borrowers on tracker arrangements may see immediate relief in their monthly repayments, savers are likely to face modest returns as interest paid on deposits declines.
Given the complexity and variability of individual circumstances, members of the public who consider responding to this news, whether by adjusting borrowing or saving strategies, are advised to consult a professional financial adviser before taking action.
Please note: Under Financial Conduct Authority (FCA) guidelines, news coverage must remain neutral, factual, and designed to inform rather than to advise. No personal advice or recommendations have been offered here. The timing and impact of monetary policy changes can vary greatly across sectors, and only qualified advisers can provide tailored advice relevant to your personal financial position.
