Bank of England’s latest decision on base rate

The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 7–2 to reduce the base rate to 4.5% at its February meeting.

Two members of the committee voted to reduce the rate further to 4.25%.

The MPC also revised its GDP forecast for 2025 from 1.5% to 0.75%.

In setting out the context to the vote, the MPC said: ‘There has been substantial progress on disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations.

‘That progress has allowed the MPC to withdraw gradually some degree of policy restraint, while maintaining Bank Rate in restrictive territory so as to continue to squeeze out persistent inflationary pressures.’

Reflecting on construction output, the Monetary Policy Report used by the MPC to inform their vote stated the rate of decline continues to ease compared to a year ago.

The report said: ‘Positive output growth is now expected to return during 2025 H2; but weaker confidence following the Budget and supply constraints suggest it will be modest.

‘Private housebuilding rates continue to pick up. Repair and maintenance output is up modestly on a year ago, spend on commercial renovations has improved and social housing providers are focusing on improving existing stock, but fewer households are undertaking housing renovations. New commercial development remains down on a year ago.’

Reacting to the vote, Dr David Crosthwaite, chief economist at BCIS, said: ‘Given the relatively weak economic performance over the last few months, it’s no real surprise that the BoE felt compelled to cut the base rate today. It might only be by 25 basis points but let’s hope that’s enough to stave off a recession and encourage some investment.

‘Any reduction in the cost of borrowing will be welcomed by the construction sector, particularly given the recent announcements that private finance is going to be required to deliver some large transport infrastructure projects.

‘Let’s hope this rate cut isn’t too little too late. With subdued growth forecast and inflationary pressures building, the question is can we avoid a period of stagflation?’

The MPC’s next vote will be published on Thursday 20 March 2025.

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