No surprise from the Bank of England, which today has reduced the cost of the money of 25 basis points, bringing the level of interest rates to 4% from 4.25% previous. A decision widely awaited from the market, an if the British central bank maintains a prudent attitude for the next few months and does not give certainties on other possible interventions within the year.
The decision of August
The Bank of England monetary policy committee, in the meeting that ended today 6 August 2025, voted with a majority of 5 to 4 the reduction of the discount rate of 0.25 percentage points, to 4% from 4.25% previous.
The decision was made to support growth and employment. The growth of the UK GDP remained contained, in line with a continuous and gradual weakening of the labor market. Risks are remained downward for the economic activity at a domestic level and linked to the geopolitical framework, although the uncertainty about commercial policies has slightly decreased.
Still high inflation
In the last two and a half years there has been a substantial disinflation thanks to the restrictive orientation of monetary policy. This progress has made it possible to reduce the discount rate in the last year, but the board remains focused on the elimination of any persistent inflationary pressures, to report inflation in a sustainable way to its 2% goal in the medium term.
Inflation increased to 3.5% in the second quarter of 2025, due to the trend of energy prices, food products and administered prices. The growth of wages remains high, but it is expected that it will slowly slow down in the rest of the year. Therefore the board continues to supervise the extent that the loosening of the wage pressures will be reflected on the inflation of consumer prices.
Forestickly approach to the medium term
Despite today’s intervention, Boe maintains a medium -term “forward -looking” approach in determining the monetary orientation necessary to achieve the inflation objective of 2% in a sustainable way.
A gradual and cautious approach to the further loosening of the restrictions of monetary policy is considered appropriate by bankers. The timing and the rhythm of future reductions in the restriction of politics will depend on the measure in which the unfruption pressures will continue to loosen themselves. Monetary policy does not follow a predefined path and the committee will continue to respond to the accumulating of evidence.
