The Bank of England lowered the rate for the third time in 2025 – now to 4%

Following the August meeting, the Bank of England lowered its key rate by 25 basis points to 4% per annum. This is the third decrease since the beginning of the year, each of which amounted to 0.25 percentage points. The decision coincided with market expectations.

The Central Bank noted that inflation in the UK has slowed significantly over the past 2.5 years due to tight monetary policy. This allowed the mitigation cycle to begin. However, the price growth rate remains above the target. In June, inflation accelerated to 3.5% due to higher prices for energy and food. 

Wage growth is still high, but it has begun to decline and is projected to continue slowing until the end of the year. The Bank of England believes that inflation will peak in September (about 4%) and begin to decline towards the target level of 2% in the medium term.

The UK economy is showing weak growth amid a weakening labor market. The regulator warned that further steps to lower the rate will be cautious and depend on the dynamics of inflationary pressure. MPC continues to closely monitor the impact of wage growth on consumer prices.

After the decision was published, the pound sterling strengthened against the dollar — the GBP/USD pair rose to $1.3408. At the same time, the British FTSE 100 stock index fell by 0.7%.