On August 7, 2025, the Bank of England (BoE) reduced its base rate by 0.25 percentage points, bringing it down to 3.8%. This decision was made in response to economic pressures stemming from new U.S. tariffs. The Bank of England projected that these tariffs would lower UK inflation by 0.2 percentage points within two years and reduce economic output by 0.3% over three years.
The Monetary Policy Committee (MPC) voted 5-4 in Favor of the rate cut, indicating a rare split among members. Two members advocated for a larger 0.5% cut, while two preferred to maintain the current rate. Despite the rate reduction, the BoE emphasized that future rate decisions would remain data-dependent, with a focus on balancing inflation control and economic growth.
This rate cut marks the fourth since August 2024, following earlier reductions to 4.75% in February and 4.5% in March. The Bank of England cautious approach reflects ongoing concerns about inflation, particularly due to persistent wage pressures and high domestic inflation expectations.
Overall, the BoE’s decision reflects a strategic effort to support the economy amidst global trade uncertainties, while remaining vigilant about inflationary risks.
What is the latest UK inflation rate?
Inflation rose to 3.8% in the year to July, the highest since January 2024, the latest figures from the Office for National Statistics (ONS).