Bank of England Cuts Key Interest Rate to 4.25%

Today (8.5.2025), the Bank of England (BOE) cut its key interest rate from 4.5% to 4.25%, influenced by global economic uncertainty caused by U.S. tariffs. This reduction was widely anticipated, especially following the slowdown in price growth, with inflation slowing to 2.6% annually in March (from 2.8% the previous month). Five out of nine policymakers voted for the reduction, while two members favored a larger 50-basis-point cut and two wanted to keep rates steady. The BOE stated that uncertainty surrounding global trade policies has intensified due to U.S. tariffs and subsequent countermeasures. ‘Global growth prospects 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,’ it added. Bank of England Governor Andrew Bailey emphasized that he expects wage pressure to continue easing, contributing to the restoration of inflation to the bank’s 2% target.