Bank of England cuts interest rates for fifth time in a year to 4% despite inflation fears: Live updates

Last August, the base rate peaked at 5.25 per cent.

Since then there have been four cuts and a fifth is expected today.

Let’s remind you of the previous decreases and when they happened.

• August 2024 – Interest rate cut from 5.25 per cent to 5 per cent
• November 2024 – Cut from 5 per cent to 4.75 per cent
• February 2025 – Cut from 4.75 per cent to 4.5 per cent
• May 2025 – Cut from 4.5 per cent to 4.25 per cent

We’re expecting to hear from Andrew Bailey this afternoon following the announcement of the new interest rates.

Alongside that decision, the Bank will also release new forecasts for the UK economy covering the next three years.

It will also update investors on whether government bond sales have affected the gilt market.

Mr Bailey (pictured last month) is expected to speak at around 12:30pm.

Today’s interest rates decision comes as economists speculate what Chancellor Rachel Reeves will do to balance the books in the upcoming autumn Budget.

Earlier this week, an economic thinktank said Ms Reeves will have to find £51billion annually in higher taxes or lower spending by 2029/30.

The National Institute of Economic and Social Research (NIESR) found the Chancellor’s ‘wafer thin’ headroom of £9.9billion she left herself last year has been wiped out, and there is now a budget deficit of £41.2billion.

Speaking yesterday, Sir Keir Starmer refused to rule out further tax hikes in the next Budget. The Prime Minister said Ms Reeves would focus on ‘living standards’ and ‘making sure that people feel better off’ in Labour’s next fiscal package.

The FTSE 100 hit a fresh record yesterday as traders placed bets on another interest rate cut from the Bank of England.

The index closed up 0.2 per cent, or 21.58 points, at 9164.31 after a similar record-breaking session on Tuesday when it passed 9142.

Traders shrugged off concerns about a trade war between the US and India after Donald Trump announced he would slap a 50 per cent tariff on goods from the South Asian nation in response to its importing of oil from Russia.

The FTSE 100 was led higher by insurer Hiscox, which jumped 9.4 per cent, or 119p, to 1379p after it announced it would be increasing its stock buyback plans by £75million.

Read the full story by Calum Muirhead here:

Economists are predicting Bank of England economists will be split on whether to cut interest rates today but added another reduction was ‘almost certain’.

Experts say the cut could help stimulate spending as businesses face higher labour costs while tariffs imposed by Donald Trump have added to global uncertainty for investors.

Matt Swannell, chief economic advisor to the EY Item Club, said a 0.25 percentage point cut was ‘almost certain’ amid a ‘sluggish’ economy.

With the MPC balancing signs of fragility in the labour market against evidence of lingering inflationary pressure, the committee will likely signal that further gradual interest rate cuts remain appropriate.

Sanjay Raja, senior economist for Deutsche Bank, said the economy has been ‘weaker than the MPC anticipated’ since it last published a Monetary Policy Report in May.

However, he said the MPC will be ‘between a rock and a hard place’, likely leading to a split vote within the nine-person committee.

House prices jumped at their fastest rate since January with home buyers boosted by falling mortgage rates.

According to Halifax, the average UK property value increased by more than £1,000 in July to £298,237, up 0.4 per cent from £297,157 in June.

It marks a return to price growth after a slump resulting from the end of tax breaks on stamp duty in April with the change adding thousands of pounds to the purchase price of most properties.

A lower base rate announced today could further reduce monthly mortgage costs for some and raise hopes cheaper deals will enter the market for those looking to join the housing ladder.

Speaking ahead of the Bank of England’s interest rates decision, one financial expert has said how investors will be hoping a reduction to 4 per cent will help restore consumer spending and business confidence.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said:

Investors are grasping for silver linings to the tariff turmoil and there’s an expectation that that weaker growth will lead to lower borrowing costs.

Investors are primed for an interest rate cut from the Bank of England later today, given the highly sluggish nature of the economy, and the rising unemployment rate.

There will be hopes that if loans become cheaper, it will help boost consumerecon and business confidence but there’s a long way to go.

If the Bank of England cuts interest rates today – many may be thinking how it affects them.

Essentially, a lower base rate can reduce the monthly mortgage costs for some homeowners but it also delivers a smaller return for savers.

Cutting interest rates can help support economic growth through lower borrowing costs, yet bolstering economic output could lead to new inflationary pressures.

Labour have taken credit for four reductions interest rate cuts before today’s announcement but with inflation and unemployment rising economists may wander whether future decreases are sustainable.

Economists think a slowdown in the UK jobs market and stagnant economic growth could prompt the MPC to further ease monetary policy.

Earlier this year, official data from the Office for National Statistics (ONS) showed the rate of UK unemployment increased to 4.7 per cent in the three months to May – the highest level for four years.

And average earnings growth, excluding bonuses, slowed to 5 per cent in the period to May to its lowest level for almost three years.

Bank of England Governor Andrew Bailey said earlier this month that the Bank would be prepared to cut rates if the jobs market showed signs of weakening.

Good morning and welcome to our live coverage as the Bank of England is expected to announce a cut to interest rates in its latest decision on the base rate at 12pm.

The bank’s nine-strong Monetary Policy Committee (MPC) is tipped to reduce the rate by 0.25 percentage points to 4 per cent – the third decrease this year and fifth in a year since borrowing costs peaked at 5.25 per cent last August.

Such a move will help release pressure on some mortgage holders and those to looking to join the housing ladder but comes amid growing fears about the UK’s sluggish econonmy.

Inflation reached an 18-month high in June after climbing to 3.6 per cent, while unemployment rose to 4.7 per cent, its highest level in four years, in May.

We will bring you the latest news and analysis throughout the day with reaction to come from Bank of England Governor Andrew Bailey and Chancellor Rachel Reeves.