Bank of England (BoE) policymakers reduced the UK base rate by 0.25 percentage points to 5.0% at their August meeting.
This was the first cut since the start of the Covid pandemic in March 2020, when the rate was reduced to just 0.1%. The rate then increased rapidly from December 2021, in response to rising inflation, and had remained at 5.25% since August 2023.
The July inflation figure (CPI – Consumer Price Inflation) was 2.2%, a slight increase from the June figure of 2.0% but well below the recent peak of 11.1%. The Bank of England has a target inflation rate of 2%, although it does expect inflation to increase slightly again in the Autumn.
The decision to cut the interest rate was finely balanced, with five of the nine members of the Monetary Policy Committee (MPC) voting for the cut, including the Governor Andew Bailey, but the remaining four members voting to hold the rate as it was. The next meeting is due to take place on 19th September.
The reduction in the base rate should see slightly better deals on offer for mortgages, loans and other borrowing, but will also mean lower rates on savings products.
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