Bank of England cuts interest rates to 4%

08 Aug 2025

The Bank of England has cut interest rates to 4%, taking the cost of borrowing to the lowest level for more than two years.

The cut, from 4.25%, is the fifth the Bank has announced since last August.

The nine-member Monetary Policy Committee was forced to hold two votes for the first time in its history.

Four of the committee initially wanted rates to be reduced to 4%, while four other members wanted to keep rates unchanged and the final member wanted a bigger 0.5 percentage cut.

As a result, the committee was forced to hold a second vote to reach a majority, which resulted in the decision to cut rates to 4%.

David Bharier, Head of Research at the British Chambers of Commerce said businesses will welcome the decision.

He added: 'With signs that the labour market is beginning to loosen and unemployment edging upwards, the Bank is right to act to mitigate the risk of a deeper downturn. 

'SMEs in particular have been under sustained pressure from cumulative cost increases and external shocks. The impact of April's national insurance rise is now tangible, with firms reporting reduced investment and recruitment plans.

'Rate cuts alone are only part of the solution. To restore business confidence, firms will need to see a roadmap to lower their cost burden, further improvements to ease trade friction, and greater investment in AI and infrastructure.'