Bank of England Cuts Rates in Close Decision, Notes Commerzbank

08:03 AM EDT, 08/07/2025 (MT Newswires) -- The Bank of England Thursday lowered its key interest rate ("Bank Rate") by 25 basis points to 4.00%, as expected, noted Commerzbank.

As such, the BoE is continuing its cautious course of loosening monetary policy restraint as since August 2024, it has reduced key interest rates at every other meeting by a total of 1.25 percentage points.

For the 31st time in a row, the decision wasn't unanimous and was even unexpectedly close: four of the nine members of the Monetary Policy Committee (MPC) voted for unchanged interest rates, and Alan Taylor initially argued for a larger rate cut of 50 basis points.

This meant that, unusually, a second vote was necessary. In the second vote, Taylor then voted for a 25 basis point cut, which secured the necessary majority. Andrew Bailey, governor of the BoE, admitted that Thursday's decision was "finely balanced".

Inflation data has recently been somewhat less favorable, wrote the bank in a note to clients. However, the BoE believes that the disinflationary trend in underlying price pressures has continued. As a consequence, the central bank appears to be focusing on the deterioration in the labor market, which will reduce inflationary pressure in the medium term.

Looking ahead, the BoE appears to be taking a "gradual and careful" approach to further monetary easing, as it has done in the past, stated Commerzbank. "The timing and pace of future reductions in the restrictiveness of policy will depend on the extent to which underlying disinflationary pressures continue to ease", the BoE also said.

Bailey reiterated his previous assessment that interest rates remain on a downward path. "A gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate," according to the BoE. This is the key statement for the BoE's forward guidance.

Commerzbank maintains its view that the BoE will continue to cut its key interest rates only at every other meeting. The next cut is as such likely to come in November.

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