Bank of England cuts rates to 4.5% as it halves GDP forecast
The Bank of England cut its policy interest rate to 4.5% as expected today. This was despite the Monetary Policy Committee (MPC) now expecting CPI inflation to pick-up to 3.75% during the summer of 2025, mainly due to higher energy prices. However, the most striking feature of the MPC’s new forecast was the halving in expected GDP growth to just 0.75% in 2025. This means the UK will only just steer clear of recession during the winter, GDP expected to fall 0.1% in Q42024 and see a marginal 0.1% gain in Q1 2025. The entire downward revision to the MPC’s GDP forecast was explained by the poor performance of the UK’s export sector, but with consumer spending (1.5%) and business investment (3%) still expected to see robust gains in 2025.
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