❓WHAT HAPPENED: The Bank of England cut interest rates by 0.25 percentage points to four percent after a rare second round of voting by the Monetary Policy Committee. The move will likely reverberate across the Atlantic, where U.S. President Donald J. Trump continues pushing Federal Reserve Chairman Jerome Powell to cut rates.
👤WHO WAS INVOLVED: The Monetary Policy Committee, including Governor Andrew Bailey and external member Alan Taylor, who changed his vote during the second round.
📍WHEN & WHERE: The decision was announced in the UK on August 7, 2025.
💬KEY QUOTE: “We’ve cut interest rates today, but it was a finely balanced decision,” said BoE’s governor Andrew Bailey.
🎯IMPACT: The pound rose 0.5 percent against the dollar, and two-year gilt yields climbed six basis points to 3.88 percent after the announcement.
In a decision that required an unprecedented second round of voting, the Bank of England reduced its interest rate by 0.25 percentage points to four percent. The Monetary Policy Committee (MPC) initially failed to achieve a majority consensus, resulting in a second vote where Alan Taylor shifted his stance to support the reduction.
The final vote was close, with five members backing the cut and four preferring no change. The decision marks the first time in the panel’s 28-year history that two rounds of voting were necessary to reach a conclusion on rates.
Governor Andrew Bailey stated, “We’ve cut interest rates today, but it was a finely balanced decision.” He emphasized that future rate reductions would be made “gradually and carefully,” with the timing dependent on easing disinflationary pressures.
The announcement caused immediate market reactions, as the pound rose 0.5 percent against the dollar to $1.3428, and two-year gilt yields increased by six basis points to 3.88 percent. Traders have adjusted their expectations for future rate cuts accordingly. The decision comes amid a challenging economic environment of high inflation and weak growth. The Bank of England has warned that food prices will push inflation further above target in the near term, with a predicted peak of four percent in September.
Notably, the decision to slash rates comes as U.S. President Donald J. Trump continues his own campaign to push Federal Reserve Chairman Jerome Powell to cut interest rates as well. Powell is currently facing increased scrutiny over the ballooning Federal Reserve renovation costs, and a revolt among some Fed members who are backing Trump’s call for a rate cut.
While the Federal Reserve’s Federal Open Market Committee (FOMC) declined to reduce borrowing rates in July, they are anticipated to back a rate cut at its upcoming September meeting.
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