UK: Bank of England Cuts Rates, Increases Inflation and Decreases Growth Predictions

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FEB 6

Above: Exterior of the Bank of England, Feb. 6 2025, London, England. Image copyright: Richard Baker/Contributor/In Pictures via Getty Imagesstory last updated FEB 7

The Facts

The Bank of England's Monetary Policy Committee (MPC) voted 7-2 to reduce the Bank Rate by 0.25 percentage points to 4.5% on Thursday, with two members preferring a larger 0.5 percentage point cut to 4.25%.
While the Bank Rate sat at an average of 0.5% between 2010-2019, the figure reached an average of 5.3% in 2023. The Bank Rate is now expected to sit at 4.2% in 2025 and 4.1% in 2026, revised up from previous estimates of 3.7%.
Gross domestic product (GDP) growth has been revised to 0.75% in 2025 compared to a previous projection of 1.5%, as the Bank claimed it estimated the UK economy had shrunk by 0.1% in Q4 2024 and was expected to grow by 0.1% in Q1 2025. The economy is then expected to grow by 1.5% in both 2026 and 2027, up from predictions of 1.25%.

The Spin

Narrative A

Despite widespread criticism, there are signs of optimism that often go unnoticed and a further Bank Rate cut is to be welcomed. Despite a tough budget in order to balance the books, private sector wages are rising faster than inflation, and consumer spending is poised to increase. Business investment is also set to recover, creating opportunities for growth. Labour is making tough but necessary decisions to restore the UK's economic health.

X Guardian

Narrative B

The UK economy is in dire straits, and Labour's approach isn't helping. With stagnant growth, inflation, and cuts to public services, Labour is mimicking the austerity policies that devastated the country under the Tories. Instead of bold economic reform, Reeves's strategy risks deepening inequality and creating long-term economic stagnation. The writing is on the wall already for the Chancellor — she must go for the country's sake before it's too late.

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