The Bank of England has cut interest rates to 4%, taking borrowing costs to their lowest level in more than two years as policymakers moved to support a weakening economy.

The decision marks the fifth reduction since last August, but it comes with a warning: inflation is still above the Bank’s 2% target, leaving officials balancing softer growth and a cooling jobs market against persistent price pressures.

Rate cut signals growing concern over momentum

The Bank’s move reflects a shift in emphasis toward the strain facing households and businesses after a prolonged period of tight monetary policy. Reuters said British firms have been struggling to grow, while recruitment surveys point to a deterioration in the labour market and the slowest pace of hiring in more than two years.

BBC reporting said the cut to 4%, from 4.25%, was widely expected, but highlighted that inflation remains above target despite the easing cycle.

Why this matters for businesses and households

Lower rates should ease pressure on mortgage holders and some corporate borrowers, while improving sentiment in rate-sensitive parts of the economy such as housing and retail.

But the Bank is not signalling a rapid return to ultra-low borrowing costs. With inflation still elevated, policymakers are likely to keep reductions gradual, limiting the speed of any relief for firms facing weak demand, higher wages and ongoing cost pressures.

What happens next

The latest cut reinforces the view that the Bank sees growth risks as increasingly important, even if price stability remains unfinished business. For markets, the key question is whether this marks the start of a faster easing cycle or simply another cautious step in a prolonged adjustment.

• **Base rate:** 4%, the lowest in over two years.
• **Change:** Down 0.25 percentage points from 4.25%.
• **Pattern:** Fifth cut since last August.
• **Backdrop:** Inflation remains above the 2% target, while labour market conditions soften.