On 5th February 2025 the Bank of England (BoE) cut its benchmark Bank Rate by 25bps, from 4.75% to 4.5%. A move that was widely anticipated by markets, it could also end up being a positive one for Wealthify Plans.
This is the third cut since August 2024 and rates are now down to their lowest point since June 2023.
All nine members of the Monetary Policy Committee voted for a rate cut — with two members even voting for a larger reduction of 50 basis points.
This differing outlook among committee members does highlight some uncertainty surrounding the UK economy.
What does this cut mean for you?
The BoE stated they expect to be able to cut rates further if inflation continues to come down. They are, however, taking a gradual and careful approach, warning that the road ahead “will have bumps” on it.[1]
The BoE also predicted inflation could rise again later this year. Inflation is predicted to come down to the 2% target, but only towards the end of 2027 (six months later than previously thought).[2]
Although forecasts show the UK narrowly avoiding a recession, growth estimates have been scaled back from 1.5% to 0.75% for 2025.[3]
Reports also stated that tariffs and other trade barriers would likely have adverse effects on UK activity. Escalation of a US trade war could slow down global economic growth, hurting the UK’s future growth prospects — and eventually this could lead to less money in the pockets of consumers.
Market reaction
UK share markets reacted well to the BoE’s latest announcement, as the FTSE 100 surged to all-time highs. This is at least an initial sign that markets are encouraged by the BoE’s proactive management of the economy, and businesses will appreciate the lower borrowing costs.
With bond and share prices rising, this could be a positive for your Plan(s) with Wealthify. Going forward, diversification is key, with your money well spread across various regions — and the patience to stay invested being the main driver of long-term growth.
As ever, our Investment Team will continue to monitor the market for opportunities, and our friendly Customer Care team are on hand for any queries you may have.
With investing, your capital is at risk. Please remember the value of your investments can go down as well as up, and you could get back less than invested.
Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.
References
- https://www.bankofengland.co.uk/-/media/boe/files/monetary-policy-report/2025/february/opening-remarks-february-2025
- https://www.bbc.co.uk/news/live/cly5rm5d7pxt#:~:text=At%20midday%2C%20the%20Bank%20of,to%200.75%25%20for%20this%20year
- https://www.morningstar.co.uk/uk/news/260431/bank-of-england-makes-third-rate-cut-in-six-months.aspx
