The Bank of England (BoE) announced on Thursday its decision to lower the key interest rate by 25 basis points (bps) to 4.5%. The Monetary Policy Committee (MPC) voted 7-2 in favor of a 0.25 percentage point reduction, with two members pushing for a deeper cut to 4.25%.
The decision follows signs of easing inflation, which stood at 2.5% in the fourth quarter of 2024. Moreover, the bank said in its release that it has seen "substantial progress" in the last two years due to the reduced effect of external shocks.
Looking forward, the BoE said inflation is expected to peak at 3.7% in the third quarter of 2025 before stabilizing. "A gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate," the MPC stated.
