The Bank of England (BoE) has announced a 0.25% cut to its base rate to bring interest rates down to 4%.

The latest move is the fifth cut to the base rate since the BoE started to bring interest rates down in August last year, from a peak of 5.25%.

At its meeting this week, the nine members on the BoE’s Monetary Policy Committee (MPC) voted by a majority of five to four for a 0.25% reduction. Four members were in favour of holding rates at 4.25%.

The central bank’s decision to announce another rate cut follows the 12-month rate of CPI inflation, as reported by the Office for National Statistics (ONS), increasing to 3.5% in Q2 2025.

According to the report published by the BoE today, the MPC is expecting inflation to edge up slightly further to peak at 4.0% in September, before starting to fall back again towards its 2% target in the months after.

“The Committee remains alert to the risk that this temporary increase in inflation could put additional upward pressure on the wage and price-setting process,” the BoE report said. “Overall, the MPC judges that the upside risks around medium-term inflationary pressures have moved slightly higher since May.”

Reacting to the rate reduction, head of research at the British Chambers of Commerce, David Bharier, said that businesses would “welcome” the decision to cut the base rate to 4%, marking a “further move away from a prolonged period of elevated borrowing costs”.

“With signs that the labour market is beginning to loosen and unemployment edging upwards, the bank is right to act to mitigate the risk of a deeper downturn,” he added.

“Rate cuts alone are only part of the solution. To restore business confidence, firms will need to see a roadmap to lower their cost burden, further improvements to ease trade friction, and greater investment in AI and infrastructure.

CEO of Kyriba, Melissa Di Donato, added that the latest BoE cut “comes at a key moment for the UK economy”.

“As the fifth cut in a year, monetary easing may provide some added relief, particularly amid job market softness. But the uncertainties of global trade tensions are weighing on growth, and inflation is still a concern, it's well above the 2% target – adding complexity to the broader economic picture.

“I do think the Government’s push for development, including major projects like the expansion of Heathrow Airport and the construction of 1.5 million new homes, signals confidence in the UK’s long-term growth. Infrastructural projects of this scale mean businesses across supply chains need to manage cash flows efficiently, ensuring capital is allocated strategically to support both growth and investment.”

The BoE’s next base rate decision will be announced on 18 September.

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