Bank of England Cuts Interest Rate to 4% in Narrow Vote Amid Economic Struggles
The Bank of England has reduced UK interest rates to 4% in a closely contested decision, aiming to support a weakening economy despite a recent uptick in inflation.
In line with market expectations, the Monetary Policy Committee (MPC) voted by a slim 5–4 majority to cut the Bank Rate by 25 basis points, down from 4.25%. This marks the fifth rate cut in the past year and brings the base rate to its lowest level since March 2023.
The decision comes against a backdrop of mounting economic concerns. UK unemployment has risen in the latest quarter, construction activity declined sharply in July, and GDP contracted in both April and May — all signs pointing to slowing momentum.
Adding to the uncertainty are global risks, particularly Donald Trump’s escalating trade wars, which threaten to disrupt international commerce and dampen growth further.
Although inflation rose to 3.6% in June — well above the Bank’s 2% target — the MPC opted to lower borrowing costs, prioritising economic stability in the face of mounting domestic and international pressures.
Bank of England Split on Rates, with Taylor Backing a Deeper Cut
The Bank of England’s Monetary Policy Committee was sharply divided over today’s interest rate decision, with a narrow 5–4 majority opting to cut the Bank Rate by 0.25 percentage points to 4%.
Governor Andrew Bailey, deputy governors Sarah Breeden and Dave Ramsden, Swati Dhingra, and Alan Taylor voted in favour of the cut — but with a twist. Alan Taylor had initially supported an even deeper reduction of 0.5 percentage points, which would have brought the rate down to 3.75%.
However, after the first round of voting revealed a split, Taylor joined the majority backing a 25 basis point cut, tipping the balance against the four members who preferred to hold rates steady at 4.25%. That group included Megan Greene, deputy governor Clare Lombardelli, Catherine L. Mann, and chief economist Huw Pill.
Taylor’s move proved decisive, allowing the cut to pass — though his initial preference signals growing urgency among some members to deliver more aggressive monetary support amid signs of economic weakness.
That historic split among policymakers meant the Bank of England’s Monetary Policy Committee (MPC) had to hold two separate votes on interest rates — for the first time in its history, according to Reuters.
Initially, members voted on Alan Taylor’s proposal for a larger 0.5 percentage point cut to 3.75%. After that failed to gain enough support, a second vote was held on the more modest 0.25 point cut to 4%, which passed by a narrow 5–4 majority. The dual-vote procedure underscores the depth of division within the MPC as it grapples with rising inflation and slowing economic growth.
