Bank of England to cut interest rates after committee's five-four split decision

UK central bank chose to reduce interest rates to 4% from 4.25%

Bank of England governor Andrew Bailey said rate cut was 'a finely balanced decision'. Picture:Alastair Grant/PA Wire

UK interest rates have been cut to their lowest level since March 2023 despite the Bank of England predicting a sharp rise in inflation amid accelerating food prices.

The central bank chose to reduce interest rates to 4% from 4.25%, pointing towards a recent fall in wage inflation and reduced uncertainty over the impact of US tariffs.

The cut came after the Bank's nine-person rate-setting committee was forced to take a second vote for the first time in its history.

The Bank's Monetary Policy Committee (MPC) initially saw four of its committee vote for the 0.25 percentage point reduction, four vote to keep rates at 4.25% and one, Alan Taylor, vote for a 0.5 percentage point cut.

Bank of England governor Andrew Bailey then led a second vote, where Mr Taylor gave his backing for a cut to 4%, providing a majority of five to four.

Mr Bailey said: "We've cut interest rates today, but it was a finely balanced decision.

"Interest rates are still on a downward path, but any future rate cuts will need to be made gradually and carefully."

The bank's Monetary Policy Committee (MPC) was split in its decision on interest rates, leading to its members holding two votes for the first time in its history. Initially, four of the nine-person committee wanted rates to be reduced by 0.25 percentage points to 4% while four wanted to keep rates unchanged, and one member preferred a bigger 0.5 percentage point cut.

This meant the committee was forced to hold a second vote in order to secure a majority, which resulted in the MPC voting by five to four to cut rates to 4%.

Mr Bailey said it was a "finely balanced decision", adding: "Interest rates are still on a downward path, but any future rate cuts will need to be made gradually and carefully."

British chancellor Rachel Reeves said: "Since the general election, interest rates have been cut five times and are now at their lowest level for two years - bringing down the cost of mortgages and loans across the UK.

"By bringing stability back to the country's finances, we're putting more money in people's pockets."