The Bank of England reduced its benchmark interest rate by 25 basis points to 4.25% on Thursday, amid subdued economic momentum and easing inflation pressures.
The widely anticipated move is aimed at supporting growth as the UK economy contends with weak output and external uncertainties, particularly around global trade.
Headline inflation cooled to 2.6% in the twelve months to March, down from 2.8% the previous month.
The moderation in price pressures has given policymakers some flexibility to ease borrowing costs without risking a resurgence in inflation.
The rate cut comes at a time when global economic activity remains clouded by geopolitical tensions and trade-related uncertainty, notably stemming from US President Donald Trump’s tariff policies.
Domestically, the UK economy has been showing signs of stagnation, with consumer sentiment soft and business investment lackluster.
The reduction in the policy rate is expected to bring some relief to households and businesses facing tight financial conditions.
Lower interest rates typically reduce borrowing costs on mortgages, personal loans, and business credit, thereby easing pressure on consumers and stimulating investment activity.
However, the move is likely to be less welcome news for savers, who may see diminished returns on savings accounts and other interest-bearing instruments.
The Bank of England’s decision places it among a growing number of global central banks opting to loosen policy in response to deteriorating growth prospects.
Market participants will now watch closely for signals on whether further easing may follow, especially if economic data continues to underperform expectations.
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