In its August meeting, the Bank of England lowered Bank Rate by 25 basis points to 4.0%—its fifth reduction in 12 months—in a decision that split the Monetary Policy Committee 5–4.
Minutes highlighted two-sided risks: inflation has recently re-accelerated toward 3.6% and remains above target, but activity indicators and a softer labour market argue for support.
The unusual need to hold two votes, reflecting intense debate over the balance of risks, signalled how finely poised the MPC is as it seeks to ease without re-igniting inflation.
Markets initially priced a higher probability of an additional cut by early 2026 but trimmed those bets after stronger GDP data.
For UK borrowers, the cut is filtering through to lower mortgage rates, especially for variable and some short-dated fixes, offering incremental relief to households rolling off expensive deals set in 2022–23.
Savers, however, face falling deposit rates, raising the risk that real returns slip below inflation for the first time in almost two years.
For the Treasury, lower gilt yields reduce debt-service costs at the margin but complicate the fiscal arithmetic if slower nominal growth persists.
The BoE’s August Monetary Policy Report projects subdued growth ahead and inflation returning to target on a longer horizon, leaving future decisions data-dependent.
Minutes highlighted two-sided risks: inflation has recently re-accelerated toward 3.6% and remains above target, but activity indicators and a softer labour market argue for support.
The unusual need to hold two votes, reflecting intense debate over the balance of risks, signalled how finely poised the MPC is as it seeks to ease without re-igniting inflation.
Markets initially priced a higher probability of an additional cut by early 2026 but trimmed those bets after stronger GDP data.
For UK borrowers, the cut is filtering through to lower mortgage rates, especially for variable and some short-dated fixes, offering incremental relief to households rolling off expensive deals set in 2022–23.
Savers, however, face falling deposit rates, raising the risk that real returns slip below inflation for the first time in almost two years.
For the Treasury, lower gilt yields reduce debt-service costs at the margin but complicate the fiscal arithmetic if slower nominal growth persists.
The BoE’s August Monetary Policy Report projects subdued growth ahead and inflation returning to target on a longer horizon, leaving future decisions data-dependent.
