Bank of England’s Decision: Rates Drop to 4.5%
The Monetary Policy Committee (MPC) has decided to trim the official bank rate by a quarter of a percent, nudging it down to 4.5 %. The vote went 7‑to‑2, with two members chafing for a bigger slice of the cut (0.5 %, settling at 4.25 %).
What the Numbers Tell Us
- Global energy prices are on the rise, nudging Q3 2025 inflation up to roughly 3.7 %.
- Domestic headline inflation is easing, but we’re still seeing a tug‑of‑war between the two forces.
- Market watchers were already gearing up for a 4.5 % cut before the MPC said “yes.”
What the Insiders are Saying
Nick Hyett, Investment Manager at Wealth Club, pointed out: “Cool, the GDP arrived lower than the market expected, inflation settled down, and unemployment crept up a touch. It’s a bit of a gloomy picture; companies are looking at possible job cuts just before wage hikes and new national insurance thresholds hit in April.”
“Hence the Bank’s 0.25 % cut isn’t exactly a surprise. The idea is that a gentle nudge might give the economy a springkick. Some MPC folks wanted a bigger push, but the consensus is now a modest dip.”
He goes on to warn: “We’re in a weird spot with uncertainties—Trump’s trade war, potential UK tariff targets, rising labour costs, and the possibility of further tax hikes in spring. With so many unknowns, this rate cut could feel more like a lucky guess than a guaranteed lift.”
Alpesh Paleja, Deputy Chief Economist at CBI, added, “The move fits what we had in mind and signals a gradual easing in monetary policy over the year.” He noted that the committee faces a balancing act: “Business growth expectations are sliding, yet inflation expectations are creeping back up—especially with higher wages from the October Budget.”
He concludes: “While we anticipate a few more cuts, the weather is now unpredictable. It’ll be the next batch of data that tells us whether the MPC will keep easing or tighten.”
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