Today, the Bank of England cut its Bank Rate by 25 basis points. This is in contrast to the US Federal Reserve’s decision to hold rates steady due to stagflation concerns. The BoE decision was not unanimous with some wanting a more aggressive cut and others preferring to hold steady. In the end the Bank decided the cut was the right thing to do as inflation cools and growth remains slow.
Will Hobbs, Head of UK Multi-Asset Wealth, Barclays Private Bank and Wealth Management, commented on the rate decision, stating that the UK economy’s “cyclical pulse” has been strengthening recently.
“Household incomes have continued to grow faster than inflation and that has been showing up in consumption,” said Hobbs.
Douglas Grant, Group CEO of Manx Financial Group, said the decision to cut interest rates aligns with the positive news offered by the fall in inflation, providing a potential boost for UK investments after a period of economic stagnation. At the same time, UK SMEs continue to face geopolitical instability and fragile supply chains.
“UK businesses must rethink their financial frameworks to strengthen stability and resilience. Regular budget reviews, agile supply chains, and strategic bulk purchasing can help offset rising costs, while embracing new technologies and streamlining operations will drive productivity and efficiency gains. Recent data from Manx Financial Group shows nearly a third of UK SMEs have paused or scaled back operations due to financial constraints, an improvement from 40% last year, but still a worrying sign. Access to external funding remains a hurdle for around 10% of SMEs, reinforcing the need for a more inclusive, resilient lending landscape,” said Grant.
He added that the UK government must prioritise a supportive financing environment, and demand is growing for flexible working capital solutions. “This is a time for lenders to step up, not step back.”
Prolific commentator Nigel Green of deVere Group chastised the Bank for being too timid, claiming the 25 bps cut does not match the threat to the UK.
“With growth slowing, business confidence cracking, and the global economy facing renewed threats from President Donald Trump’s erratic trade policies, the Bank’s caution risks becoming part of the problem,” said Green.
He believes that a 50 bps cut was needed, and the Bank “blinked” because it decided not to act decisively.
Paul Noble, CEO of Chetwood Bank, said the decision to cut rates by 0.25% rather than half a percentage point might appear underwhelming to some, given the challenges being faced. He echoed Green’s concern, stating that the Bank has missed an opportunity to “restore confidence and stimulate growth in the market.”
The trade agreement with the US, expected to be revealed later today, could alter market expectations, contingent upon the details of the agreement.