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Published: 09/05/2025
The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 5–4 to reduce the base rate to 4.25% at its May meeting(1).
Two members of the committee voted to reduce the rate further to 4% and two preferred to maintain it at 4.5%.
In setting out the context to the vote, the MPC said: ‘There has been substantial progress on disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations. That progress has allowed the MPC to withdraw gradually some degree of policy restraint, while maintaining Bank Rate in restrictive territory so as to continue to squeeze out persistent inflationary pressures.’
The committee also suggested that, although wholesale energy prices have fallen back since the last time members met, previous increases in energy prices are still likely to drive up inflation from April onwards, to a predicted 3.5% for 3Q2025, and for it to fall back thereafter.
In making its decision, the committee also pointed to the effects of international economic movement, saying that uncertainty around global trade policies has intensified since the imposition of tariffs by the United States and the measures taken in response by some of its trading partners.
It reported: ‘There has subsequently been volatility in financial markets, and market-implied policy rates have moved lower. Prospects for global growth have weakened as a result of this uncertainty and new tariff announcements, although the negative impacts on UK growth and inflation are likely to be smaller.’
Reacting to the decision, Dr David Crosthwaite, Chief Economist at BCIS, said: ‘With increasing economic headwinds both domestically and internationally and while inflation is still slightly above target, the move is as an attempt to boost the economy by lowering the cost of borrowing.
‘Hopefully this will go some way to encouraging investment in fixed assets, which should act as a stimulus for the construction sector going forward.’
The MPC’s next vote will be published on Thursday 19 June 2025.
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(1) Bank of England – Bank Rate reduced to 4.25% – May 2025 - here
