The Bank of England has slashed interest rates to 4.25 per cent in a boost to mortgage-holders, marking the lowest level for two years as the central bank warned an escalating global trade war will drag on growth over the next three years.
Five members of the Bank’s nine-strong Monetary Policy Committee voted for the 0.25 percentage point cut, while two members voted to hold rates at 4.5 per cent, and a further two called for a sharp cut to 4 per cent.
Andrew Bailey, governor of the Bank of England, said on Thursday: “Inflationary pressures have continued to ease so we’ve been able to cut rates again today.”
The Bank also predicted the UK economy will grow by 1 per cent this year, upgrading its previous 0.75 per cent forecast on the back of a strong start to 2025 – but it cut its UK growth forecast to 1.25 per cent for 2026, from 1.5 per cent in its February projections.
It said recently announced US tariff plans and their impact on global trade will dent UK growth by 0.3 percentage points over the next three years.
However, the predictions come hours ahead of an announcement from President Donald Trump, which is widely expected to unveil a trade deal between the UK and US.
Key Points
- Bank of England slashes interest rates to 4.25% following split vote
- UK economic growth set to be stronger than previously thought this year, according to new forecasts
- Bank of England governor welcomes expected announcement of UK-US trade deal
- 'Full and comprehensive' UK-US trade agreement to be announced, Trump says
Union Unite calls Bank's interest rate cut 'long overdue'
13:30 , Tara CobhamTrade union Unite called the Bank of England’s interest rate cut “long overdue” on Thursday.
Unite general secretary Sharon Graham said: “This cut to interest rates is necessary and long overdue.
“However, we will need more serious action to reverse over a decade of falling living standards for workers and communities.
“This must include a joined-up industrial strategy to tackle energy profiteering, rebuild our industrial base and boost the economy.”
Bank of England governor welcomes expected announcement of UK-US trade deal
13:06 , Tara CobhamBank of England governor Andrew Bailey welcomed the expected announcement of a UK-US trade deal later on Thursday afternoon.
He said: "We haven't been briefed, but we do have news to suggest that there will be an agreement and we welcome this news. It will help to reduce uncertainty.
"The UK is, though, a very open economy and is affected by the tariffs affecting other economies.
"I say that because I hope the UK agreement, if it is the case this afternoon, is the first of many.
"It is excellent that the UK is leading the way and I do congratulate all those involved."
Rate cut is 'timely shot in arm' for firms, Institute for Chartered Accountants says
13:00 , Tara CobhamThe Institute of Chartered Accountants in England and Wales (ICAEW) said the Bank of England’s Thursday rate cut is a “timely shot in the arm” for firms.
Suren Thiru, ICAEW economics director, said: “This cut in interest rates is a timely shot in the arm for those businesses struggling to adjust to last month’s substantial spike in business costs and households contending with burdensome mortgage costs.
“While this reduction confirms that UK interest rates are trending downwards, it won’t materially reverse the financial squeeze or slide in sentiment among households and firms, given that many other costs are rising, and global headwinds are still elevated.”
He added: “With inflation expected to be slightly more subdued and concerns over turbulence in the global economy likely to persist, even with a US-UK deal on trade, the case for accelerating the pace of interest rate cuts may still increase.”
Shadow chancellor blames Labour for interest rates 'remaining high'
12:45 , Tara CobhamShadow chancellor Sir Mel Stride said interest rates remained high, blaming Labour for “economic mismanagement”.
Interest rates have fallen under Labour but Sir Mel hit out at Rachel Reeves’ policies, suggesting they had prevented more aggressive cuts.
“While we welcome this decision, which will provide some relief to families enduring ever-rising taxes under this Labour Government, interest rates remain high,” Sir Mel said.
“Labour’s economic mismanagement is keeping interest rates higher for longer, pushing up bills and subjecting working people to tax hikes, leaving families £3,500 worse off.
“Labour must put working people first and change course now.”
London's FTSE 100 Index holds onto gains
12:31 , Tara CobhamLondon's FTSE 100 Index held onto gains following the rate cut decision while the pound strengthened slightly.
The FTSE 100 stood 30 points higher at 8589.3, up 0.4 per cent, after rates were cut to 4.25 per cent from 4.5 per cent.
Sterling edged 0.3 per cent higher to 1.3331 US dollars and was 0.2 per cent up at 1.1770 euros.
Chancellor welcomes interest rate cut but acknowledges ongoing cost-of-living squeeze
12:14 , Tara CobhamChancellor Rachel Reeves has welcomed the interest rate cut but acknowledged families are still facing a cost-of-living squeeze.
She said: “This interest rate cut is welcome news, and the fourth since we came into government making it cheaper for businesses to borrow, reducing the cost of a new mortgage, making homeownership more accessible, car finance more affordable and easing the pressure on those paying off personal loans.
“But there is more to do, and I know families are still facing cost-of-living pressures.
“In a changing world we’re bringing stability to the public finances and going further and faster to grow the economy, putting more money in the pockets of working people through our plan for change.”
Full story: Bank of England cuts interest rates to 4.25% in boost to businesses
12:12 , Tara CobhamThe Bank of England has confirmed a 25 basis points cut to the Bank Rate down to 4.25 per cent, a second such drop this year in an ongoing boost to businesses and mortgage payers alike.
Following cuts in February and now May, the base rate is down from a high of 5.25 per cent to a level last seen two years ago in May 2023.
While the Monetary Policy Committee (MPC) had been widely expected to bring interest rate down this time, there is a wider possibility for back-to-back rate cuts - while some analysts predict a further three cuts to happen this year, bringing the interest rate down below four per cent for the first time since January 2023.
Here’s the full story from The Independent’s business and money editor Karl Matchett:
UK economic growth set to be stronger than previously thought this year, according to new forecasts
12:10UK economic growth is expected to be stronger than previously thought this year, but weaker over 2026 as the impact of tariffs on global trade takes its toll, according to new forecasts from the Bank of England.
The projections show gross domestic product (GDP) will average at 1% this year, marking an upgrade from the 0.75% growth predicted in the Bank’s last report in February.
This is largely due to growth over the first three months of 2025 being higher than the Bank had previously anticipated.
But the forecast for 2026 has been downgraded to 1.25%, from 1.5% previously.
The Bank also cut its growth outlook for the world economy to 1.5% in 2026, from 2% previously, as new US tariffs and heightened uncertainty over global trade weigh on economic activity around the world.
Bank of England slashes interest rates to 4.25% following split vote
12:03 , Tara CobhamThe Bank of England has slashed interest rates to 4.25 per cent in a boost to mortgage-holders, following a split vote among policymakers.
The Bank’s nine-person Monetary Policy Committee (MPC) voted by a majority of five-four to reduce rates by 0.25 percentage points, bringing it down to the lowest level since May 2023.
Two members of the MPC, Swati Dhingra and Alan Taylor, wanted to push through a bigger 0.5 percentage point reduction to interest rates.
Another two members, Catherine L Mann and Huw Pill, preferred to keep rates unchanged at 4.5 per cent.
The committee stressed that it remains “sensitive to heightened unpredictability in the economic environment” and that a “gradual and careful approach” to cutting rates was appropriate.
Bank of England set to announce interest rates decision in 10 minutes
11:52 , Tara CobhamThe Bank of England is set to announce its interest rates decision in 10 minutes.
The Bank’s nine-strong monetary policy committee is set to slash its base rate in a boost to mortgage-holders, as the UK’s economic growth outlook worsens in response to Donald Trump’s global trade war.
Unusually the announcement will be made at 12.02pm not midday, to allow for the two minutes silence being held to mark the 80th anniversary of VE Day.
'Full and comprehensive' UK-US trade agreement to be announced, Trump says
11:45 , Tara CobhamA “full and comprehensive” trade agreement between the UK and US is set to be announced today, US president Donald Trump has said.
“The agreement with the United Kingdom is a full and comprehensive one that will cement the relationship between the United States and the United Kingdom for many years to come,” he said.
“Because of our long time history and allegiance together, it is a great honor to have the United Kingdom as our FIRST announcement.
“Many other deals, which are in serious stages of negotiation, to follow!”
Follow our politics live blog for all the latest updates on this
Tariffs force 'massive reappraisal' of UK interest rates' future, expert says
11:17Tariffs have forced a “massive reappraisal of the future path of UK interest rates”, an expert has said.
Laith Khalaf, head of investment analysis at AJ Bell, explained: “As things stand, markets are focusing on the collateral damage to the UK economy rather than the potential for a trade war to ignite inflation once again.
“The effects of trade tariffs, once imposed, are highly unpredictable and could unleash both inflationary and deflationary forces.”
Only one in 10 Britons concerned about interest rate changes, new research suggests
10:46 , Tara CobhamOnly one in 10 Britons are concerned about interest rate changes, new reseach has suggested.
Just 9.8 per cent of UK adults who were surveyed appeared to care, with the Bank of England set to slash rates today.
Stephen Brockway, Chief Research Officer at Maru, which polled 1,000 Britons for the research, commented: “While a reduction in interest rates may offer a modest boost to household finances, it's not a major concern for most people right now – particularly for those without a mortgage.
“Even with a 0.25 percentage point cut, we're still far from the era of ultra-low, post-Covid mortgage rates.
“Our research shows that concerns about the economy and rising prices driven by the cost of living crisis far outweigh any focus on interest rate movements.
“A small change like this is unlikely to significantly shift consumer confidence.
“When it comes to the cost of living, the public is increasingly looking for action – not just from politicians, but also from the businesses they engage with. There is growing support for brands that take a clear, proactive stance against rising prices – those seen to be genuinely on the side of the consumer.”
Next hikes full-year guidance thanks to weather boost for spring sales
10:24 , Tara CobhamWarm spring weather has helped retailer Next raise its full-year guidance once again after giving a boost to summer clothing sales.
The fashion-to-homewares group reported an 11.4 per cent jump in full-price sales for the 13 weeks to April 26, notching up £55 million more sales than it had expected for the quarter.
It said full-year results were set to be better than predicted thanks to the first quarter outperformance, raising its guidance for pre-tax profits by £14 million to £1.08 billion, which would mark a 6.8 per cent jump on the previous year.
Full-year sales are also now expected to lift by 6 per cent to £5.4 billion, up from £5.3 billion previously pencilled in.
The group added a note of caution, with expectations that some customers would have brought forward summer purchases that would normally have been made in its second quarter.
17% of businesses feared being hit byTrump’s tariffs, new figures reveal
09:59 , Tara CobhamAs many as 17 per cent of businesses feared being hit by US president Donald Trump’s tariffs, new figures have revealed.
The Office for National Statistics (ONS) released a report today stating that 17 per cent of businesses with more than 10 employees said in late April that they expected to be impacted by the tariffs in the next month.
Top concerns included plummeting demand and being forced to hike prices for customers.
It comes as the the US and UK are poised to announce a major trade deal today, with the new data highlighting the importance of today’s announcement for British companies.
17% of businesses with 10+ employees said in late Apr they expect to be impacted by the United States tariffs in the next month.
— Office for National Statistics (ONS) (@ONS) May 8, 2025
The most commonly reported expected impacts were:
· reduced demand (7%)
· passing on additional costs to customers (7%)
➡️ https://t.co/XRKwRKAu9h pic.twitter.com/RhvUBGmFVG
Norway holds policy rate steady at 17-year high of 4.50% reflecting recent inflation resurgence
09:51 , Tara CobhamNorway's central bank has kept interest rates on hold at a 17-year high of 4.50 per cent on Thursday, as unanimously predicted by analysts, reflecting a recent resurgence of inflation that has prevented policy-makers from cutting borrowing costs.
"If the policy rate is lowered prematurely, prices may continue to rise rapidly," Norges Bank Deputy Governor Paal Longva said in a statement.
"The committee's current assessment of the outlook implies that the policy rate will most likely be reduced in the course of 2025," he added.
The Norwegian crown strengthened slightly to 11.71 against the euro by 8.10 GMT, from 11.72 just before the announcement.
Norges Bank in a March policy reversal maintained its interest rate at 4.50 per cent, the highest level since 2008, as an unexpected rise in consumer prices led the central bank to postpone long-planned monetary easing.
Think-tank blames Reeves' policies on weaker than expected UK economic growth forecast
09:39 , Tara CobhamA think-tank forecasting weaker than expected growth for the UK economy has blamed chancellor Rachel Reeves’ policies rather than the impact of US President Donald Trump's increased trade tariffs.
The government is on track to miss its key fiscal rules, increasing the likelihood of tax hikes later this year, whil economic growth is also on track to be weaker than previously expected this year, the National Institute of Economic and Social Research (Niesr) has warned.
Benjamin Caswell, a senior economist at the Niesr, said the downgrade primarily reflected domestic factors over Mr Trump’s sweeping tariffs, with Ms Reeves introducing a number of controversial measures in her Spring Statement in March.
Mr Caswell told Reuters: “Yes, tariffs have engendered a lot of uncertainty, but I don't think that should be basically taking the government off the hook.”
Chancellor on track to miss fiscal rules, warns economic forecaster
09:17 , Tara CobhamThe government is on track to miss its key fiscal rules, increasing the likelihood of tax hikes later this year, an economic think tank has warned.
Economic growth is also on track to be weaker than previously expected this year, according to the National Institute of Economic and Social Research (Niesr).
Fresh forecasts from the organisation indicated that a slowdown in domestic demand and global economic uncertainty will impact potential growth throughout the year.
It predicted that the UK economy will grow by 1.2 per cent in 2025 “amid low business confidence, high uncertainty and rising cost pressures”.
In its previous forecasts in February, Niesr had pointed to 1.5 per cent growth for the year.
The think tank indicated that the reduced level of growth will result in lower than previously predicted tax receipts.
As a result, it said the government is now expected to miss its fiscal rules requiring UK national debt as a share of the economy to fall and to be on course for a budget surplus.
In the government’s spring statement, chancellor Rachel Reeves said state finances were on track to give a headroom worth around £9.9 billion by 2029/30.
Niesr’s forecasts suggest this could now be set for a shortfall of £62.9 billion over this time frame, suggesting the Treasury could need to look at more spending cuts or tax increases to achieve a surplus.
PM to make statement on US trade talks amid reports deal has been reached
09:11 , Tara CobhamSir Keir Starmer will provide an update on trade talks with the US later on Thursday, Downing Street has said amid reports Donald Trump is set to announce a deal with the UK.
The US president teased the announcement of a “major trade deal” with a “big, highly respected country” in a post on his Truth Social platform overnight, with a press conference expected around 3pm UK time.
American media, including the New York Times, has reported that the deal is with the UK, citing people familiar with the plans.
A Number 10 spokeswoman said talks with the US had been “continuing at pace and the Prime Minister will update later today”.
The Government has been pursuing a deal with the US to reduce the impact of sweeping tariffs imposed by Mr Trump last month, which placed a 10 per cent levy on all UK exports and a 25 per cent charge on steel, aluminium and cars.
British Gas expects profit hit after warmer than usual spring
09:05 , Tara CobhamThe parent company of British Gas has said the energy supplier’s profit will take a hit after warmer than usual spring weather.
Centrica said on Thursday that the residential energy arm of British Gas “has been impacted by warmer than normal weather in Q2 (the second quarter)”.
However, it is still expected to be within its £150 million to £250 million sustainable profit margin, it added.
The company was updating investors ahead of its annual general meeting on Thursday morning.
Centrica added that it remains in talks with ministers about securing financial support to expand and revamp its Rough gas storage site.
Suggestions today could be a major day for UK economy
08:57 , Tara CobhamToday could be a major day for the UK economy, the BBC’s economics editor has suggested.
In a post on X, Faisal Islam said: “Very possible that we get BoE rate cut today, tariff mitigation deal with the US which leaves space for substantive eradication of post Brexit red tape with EU – all on heels of most intensive full fat trade deal with world’s fast growing most populous country.”
🇬🇧
— Faisal Islam (@faisalislam) May 8, 2025
very possible that we get
⚖️ BoE rate cut today
🇺🇸 tariff mitigation deal with the US which leaves space for
🇪🇺substantive eradication of post Brexit red tape with EU
🇮🇳 all on heels of most intensive full fat trade deal with world’s fast growing most populous country
Average UK house price increased by nearly £900 in April, according to Halifax
08:45 , Tara CobhamThe average UK house price increased by nearly £900 month on month in April, despite some homebuyers facing a stamp duty cliff edge, according to an index.
Halifax recorded a 0.3 per cent month-on-month price rise in April, following a 0.5 per cent monthly fall in March.
The annual house price growth rate ticked up to 3.2 per cent in April, from 2.9 per cent in March, Halifax said.
The average property price in April was £297,781, up from £296,899 in March.
Amanda Bryden, head of mortgages, Halifax, said: “UK house prices rose by 0.3 per cent in March, an increase of just under £900.
“We know the stamp duty changes prompted a surge in transactions in the early part of this year, as buyers rushed to beat the tax-rise deadline.
“However, this didn’t lead to a significant increase in property prices, with the last six months characterised by a stability in prices rarely seen since the pandemic.”
What is happening to interest rates elsewhere in the world
08:05 , Tara CobhamThe US Federal Reserve kept rates unchanged Wednesday as its policymakers wait to see how Donald Trump’s tariffs affect the US economy before making any moves.
This is unlike the European Central Bank, which cut interest rates last month.
And also unlike what is expected to happen in the UK today, with the Bank of England expected to also cut rates.
When is Bank of England set to announce interest rates decision
07:50 , Tara CobhamThe Bank of England’s final decision on whether to increase or decrease interest rates, or to keep them the same, is usually announced at midday.
However, because of the two minute silence being held at midday to mark the 80th anniversary of VE Day, the announcement today will be made at 12.02pm.
What is happening to rate of inflation?
07:22 , Andy GregoryThe rate of Consumer Prices Index (CPI) inflation in the UK – a critical metric considered by the Bank of England when cutting interest rates – eased to 2.6 per cent in March, down from 2.8 per cent in February
The fall – after drops in the price of petrol and computer games – marked the second consecutive monthly fall but economists have predicted it will spike higher again in April.
However, inflation is expected to rise further before it starts falling again back to the 2 per cent target level.
Economists have predicted it could rise to as much as 3.6 per cent in April, with the Bank of England predicting inflation will peak at about 3.7 per cent later this year.
It is then expected to remain steadily at 2 per cent until 2027, according to the central bank.
Read more details here:
Why has inflation fallen and what does it mean for households?
Major bank predicts four interest rate cuts
07:16 , Andy GregoryThe Bank of England is set to meet on 8 May and interest rates are widely expected to be cut 25 basis points down to 4.25 per cent - but homeowners and businesses might be pleased to know the drop won’t stop there.
While the BoE has pledged a gradual approach to cutting rates, in fear of letting inflation run riot again as it did two years ago, many experts are now foreseeing at least a further two cuts in 2025 - and one, Barclays, believes the UK may now see four consecutive cuts to the interest rate.
That would take the base rate down to 3.5 per cent, a level it has not been at for more than two years, since January 2023.
Here’s what such a reset would mean for your money – and why it still might turn out differently.
Our business and money editor Karl Matchett reports:
Major bank predicts four interest rate cuts - here’s what it might mean for you
Bank of England to delay rates announcement to honour VE Day
07:11 , Andy GregoryThe Bank of England’s interest rate decision this lunchtime will be delayed by two minutes to honour the silence to mark the 80th anniversary of VE Day.
Publication of the Bank’s quarterly economic forecasts will also be delayed by two minutes.
Read more details here:
Bank to delay rates announcement due to VE Day two-minute silence
Analysts say some rate-setters could even push for cut of 0.5%
07:05 , Andy GregorySandra Horsfield, an economist for Investec, said it is a “near-certainty” that the Bank of England will reduce borrowing costs on Thursday, with most participants in the financial markets pricing in a rate cut.
And analysts even said some members of the central bank’s monetary policy committee could push for a larger 0.5 percentage point cut – in a bid to reduce borrowing costs further and ease pressure on households and businesses.
Bank of England poised to cut interest rates
07:00 , Andy GregoryThe Bank of England is poised to cut interest rates as the threat of an escalating global trade war looms and the economic growth outlook worsens.
Most economists think UK interest rates will be reduced to 4.25 per cent from their current level of 4.5 per cent on Thursday.
Anna Wise has more in this report:
Bank of England poised to cut interest rates as tariffs to weigh on growth
