On February 6, 2025, the Bank of England decided to cut interest rates by 0.25%, bringing them down to 4.5%. This is the third cut in the last six months, as the Bank tries to balance economic growth with keeping inflation under control.

So, what does this mean for businesses and individuals?

Why Was the Rate Cut?

There are a few key reasons behind this decision:

Inflation is still a concern – While it has come down in the last two years, prices are still rising. Inflation hit 2.5% in late 2024, and experts predict it could climb to 3.7% by the end of 2025, mainly due to global energy prices and rising costs for essentials.

The economy isn’t growing as expected – The UK’s economy is slowing down, and the Bank of England has cut its growth forecast from 1.5% to just 0.75% for this year. That means businesses are feeling the squeeze, and confidence is low.

The job market is changing – The good news? Job openings rose by 7.2% in January – the first increase in months. But businesses are still dealing with rising costs, and some are even considering job cuts due to planned tax hikes.

How Does This Affect You?

If you have a mortgage or loan, you might see lower repayments, which could help ease financial pressure.



For businesses, borrowing could become cheaper, making it easier to invest in growth.

If you’re a saver, interest on savings accounts might drop, meaning lower returns.

The big question now is whether more cuts are on the way or if inflation will push rates back up. For now, it’s all about finding the right balance between helping the economy grow and keeping prices stable.