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The Bank of England cuts interest rates from 4.5% to 4.25% – the lowest rate since May 2023
The nine-person committee was divided: five wanted the cut to 4.25%, two wanted a bigger cut to 4%, while two wanted no change
This is an important moment for the UK economy, writes our economics editor Faisal Islam
A lower rate is designed to boost spending by making borrowing, including mortgages, cheaper – but cutting rates means savers get lower returns
In a new forecast, the Bank also expects higher economic growth in the UK this year – but lower growth after that
And the Bank's governor, Andrew Bailey, welcomes news of the UK's tariff deal with the US – but says he hasn't been briefed on the details
Edited by Owen Amos, with Michael Race reporting from the Bank of England
Michael Race
Reporting from the Bank of England
The Bank of England's news conference has ended but there's still a lot to look at in its report.
As well as having a host of complicated charts and tables, it has feedback from its "agents" around the country, on what they feel is happening in the economy.
The main points are:
Kevin Peachey
Cost of living correspondent
Uncertainty is a word that’s come up a lot following the latest rate decision.
With the committee’s vote split three ways, even the Bank’s governor said he was undecided in the run-up to the latest vote.
It signals uncertainty in the future path of interest rates. Uncertainty also abounds in the UK and global economy, despite progress on a US-UK trade deal.
That has an impact on us all, because the markets will have to chew all this over, as will businesses with their investment decisions. That can affect jobs and wages.
In turn, lenders will judge whether it gives them confidence to keep reducing their own interest rates.
As one mortgage broker says, borrowers will need to consider how quickly things can change.
In other words, we all need to factor uncertainty into our financial decisions.
Leading industry body the Confederation of British Industry says the Bank of England could be more cautious on rate cuts this year because of the uncertainty caused by President Trump's trade tariffs.
Alpesh Paleja, Deputy Chief Economist, CBI, says "heightened uncertainty could keep the MPC from easing off on the brakes too much".
But, Paleja adds, "with inflation risks increasingly tilting to the downside, a faster pace of rate cuts may become more palatable to a growing number of [CBI] members".
Meanwhile, Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, says: "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."
Let's break away now from the Bank of England news conference, and bring you reaction to the interest rate cut from one of the UK's largest trade unions, Unite.
"This cut to interest rates is necessary and long overdue," Sharon Graham says.
"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."
Here are the full quotes from Andrew Bailey's news conference, in which he discusses the UK-US trade deal, which is expected to cut some tariffs.
"We haven't been briefed, but we do have news to suggest that there will be an agreement and we welcome this news," he says.
"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."
Bailey says it is "excellent that the UK is leading the way" with an expected trade deal with the US, which will "help to reduce uncertainty".
As a reminder, we're expecting the deal – which will cut tariffs on some goods – to be announced in Washington DC at 15:00 BST.Michael Race
Reporting from the Bank of England
Bailey says the Bank has not yet been briefed on the US-UK tariff deal that's being announced in Washington DC this afternoon.
He adds that while there has been a lot of headlines on US tariffs, global trade policy is only "one source of risk" to inflation in the UK.Michael Race
Reporting from the Bank of England
The Bank’s governor Andrew Bailey begins his news conference by saying cutting rates was in part due to inflation being lower than expected in March.
However, he goes on to say inflation is expected to rise temporarily, largely due to higher energy prices.
He says the message the Bank is getting from businesses is one of "caution" when it comes to investing.
Reaction now from Shadow Chancellor Mel Stride. He hits out at Rachel Reeves and Labour, claiming their economic policies have prevented more aggressive cuts to interest rates.
"While we welcome this decision [to cut rates], which will provide some relief to families enduring ever-rising taxes under this Labour government, interest rates remain high," he says.
"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."Kevin Peachey
Cost of living correspondent
The latest cut by the Bank of England – the second of the year – will have an immediate impact on hundreds of thousands of home loans.
Nearly 600,000 homeowners are on tracker deals. Typically, they will see their monthly repayments fall by about £29, according to figures from banking trade body UK Finance.
Those on standard variable rates will need to see how their lender reacts, and savers with instant-access accounts will also likely receive a message from their provider in the coming days about returns on those savings.Michael Race
Reporting from the Bank of England
I've spent the past two hours locked in a room in the depths of the Bank of England, digesting the latest rates decision and the latest report on the UK economy and inflation.
Now we've hot-footed it over to the news conference area, where we'll shortly hear from the Bank's governor Andrew Bailey and his colleagues.
The Bank of England expects UK economic growth to be stronger than previously thought this year, but weaker after that.
The projections expect gross domestic product (GDP) to grow by 1% this year, marking an upgrade from the 0.75% growth predicted in the Bank's report in February.
This is largely due to growth over the first three months of 2025 being higher than anticipated.
But the forecast for 2026 has been downgraded to 1.25% growth, from 1.5% previously.
The Bank also cut its growth outlook for the world economy to 1.5% in 2026, from 2% previously, due to US tariffs and uncertainty over global trade.
Now let's bring you some reaction from Chancellor Rachel Reeves.
She says: "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."
Faisal Islam
Economics editor
This is an important moment for the UK economy. Rates are now down a full percentage point from their peak, and are likely to go down further over the rest of the year.
Rate cuts are likely to be "gradual and careful", according to the Bank's governor Andrew Bailey, but there was a three-way split over a larger cut, or no move at all (see our previous post).
The Bank gave its most through assessment of the impact of President Trump’s tariff wave, saying it would slow the UK economy and lead to lower inflation than expected.
This slower inflation arises from lower oil and gas prices which should be felt by British households, and the likely diversion of cheap goods imports from Asia to Europe including the UK.
The Bank also forecast a significant slowing of the US economy hit by its own tariffs.
UK GDP growth in the first quarter of this year, to be released next week, is now forecast to be a very robust 0.6%, boosted by some trade war-related stockpiling.
The Bank also said the impact of the National Insurance was "fairly small to date".
With rates falling, trade deals being signed, and more to come with the EU and Gulf, this could be a significant turning point for the UK after years of uncertainty.
The Bank’s rate-setting committee was divided – five members voted to cut rates to 4.25%, two voted in favour of a larger 0.5% reduction and two voted for no change. Michael Race
Reporting from the Bank of England
Andrew Bailey, the Bank's governor, says inflation easing was behind the decision to cut.
But he warns the "past few weeks have shown how unpredictable the global economy can be" following the introduction of worldwide tariffs President Trump.
The Bank of England has cut interest rates from 4.5% to 4.25%.
We'll bring you more on this shortly, including the breakdown of how the Bank's committee voted. Stay with us.Michael Race
Reporting from the Bank of England
I was at the last interest rate decision meeting in March, when the Bank decided to hold rates at 4.5%.
The reason behind holding, they said, was due to tariffs on imports to the US by President Donald Trump creating “uncertainty”.
Banks, businesses, and investors generally dislike economic uncertainty, as it adds more risk to big financial decisions and makes it difficult to plan for the future.
The Bank’s governor Andrew Bailey, however, said he still believed rates were on a gradual declining path.
A heck of a lot has happened with tariffs and the global trade war since the Bank last met – so one could argue a lot of uncertainty remains.
We're about to see what the Bank’s rate-setters make of it.
Beverley is a foster carer in Hyde in Greater Manchester. She rents a five-bedroom house but isn’t hopeful that any reduction in mortgage rates will be passed on to her.
"My rent will just keep going up because the houses are getting dearer and dearer," she says.
She pays £1,400 a month in rent. "Even if I look to downsize, three-bedroom properties are £1,200," she tells us.
Samren Reddy, 21, is a third-year medical student at the University of Liverpool.
He got in touch with Your Voice, Your BBC News as he’s hoping to save enough to afford his first house.
"A lot of our parents have instilled that home ownership is the goal. It’s a home where you build memories. It’s becoming more and more daunting that I’ll be able to rent and also save for a deposit," he says.
"I don’t think a small decrease [in interest rates] will be a game changer. We’re saving for the initial upfront deposit, this is a sticking plaster.
"Even if I’m trying to save for a home, alongside my day-to-day living, even if I may be paying less on a loan and could get a cheaper mortgage, it’s swallowed up by the pressures of living."
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