Published August 7. 2025 10:10 pm est
by Richard Fitzgerald Cason
Editor in Chief,
NEWSMOVESMARKETSFOREX ®
- Bank of England (BoE) made a significant decision by cutting interest from 4.25% to 4.0%
- Decision was not unanimous, with a split vote of 5-4 among the Monetary Policy Committee
- UK economy is currently facing a contraction with GDP shrinking by 0.1% in May
- The pound has been on an upward trend for five consecutive days
- Ashley Webb, a U.K. economist at Capital Economics predicting that the BoE could cut rate to 3.00% in 2026, despite the recent rise in inflation
Bank of England (BoE) made a significant decision by cutting interest rates from 4.25% to 4.0%
Consumer Price Index (CPI) for June showed inflation at 2.7%
BOE Interest rate decision August 7, 2025 cutting interest rates from 4.25% to 4.0%.
In the press conference following the announcement, covered the facts that the UK economy is currently facing a contraction, with GDP shrinking by 0. 1% in May.
This downturn has been attributed to a slowdown in key sectors like production and construction, while the services sector saw a slight increase.
The BoE’s decision to cut rates aims to stimulate economic activity by encouraging spending rather than saving, which is crucial in a time of economic uncertainty.
British pound (GBP) showed resilience, trading at approximately 1.3424 against the US dollar
Impact on the British Pound Against the US Dollar
Following the announcement, the British pound (GBP) showed resilience, trading at approximately 1. 3424 against the US dollar (USD).
This represents a 0. 5% increase, reflecting a bullish sentiment among traders despite the rate cut.
The pound has been on an upward trend for five consecutive days, suggesting that investors are optimistic about the currency’s potential to strengthen further.
George Brown, a senior economist at Schroders, while the rate cut was expected, the path forward remains unclear.
Economists have mixed feelings about the BoE’s decision. George Brown, a senior economist at Schroders, noted that while the rate cut was expected, the path forward remains unclear.
He emphasized that the conflicting data on jobs, growth, and inflation calls for different policy approaches, which was reflected in the unprecedented two rounds of voting needed to reach a majority decision.
He stated, “Given the uncertainty presented by the conflicting data, the committee is right to stick to its ‘gradual and careful’ mantra” and suggested that another cut in
November might be on the table if disinflation is evident. Ashley Webb, a U. K. Economist at Capital Economics, expressed a more optimistic view, predicting that the BoE could cut rates further to 3. 00% in 2026, despite the recent rise in inflation.
He believes that the weakness in the labor market will eventually lead to slower wage growth and inflation, aligning with the BoE’s target.
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