The interest rate was cut to 4.25% as Bank of England acts to shield UK economy from global trade tensions and weak domestic data.

The Bank of England has lowered the base rate by 0.25 percentage points to 4.25% amid signs of slowing economic activity and uncertainty from US trade policy. Aiming to stimulate demand, the cut reflects concerns over stagnant GDP growth, falling business investment and weak consumer confidence. The rate reduction may help ease borrowing costs and support spending and investment, yet inflationary pressures—driven by council tax hikes and utility prices—remain elevated above the 2% target. The move underscores the Bank’s cautious balancing act between supporting growth and anchoring inflation expectations.

UK interest rates fall to 4.25% as Bank of England announces a quarter-point cut | Interest rates | The Guardian

1. Examine how a base rate cut can influence short run economic growth in the UK.

2. Discuss the key reasons for the Bank’s decision to cut the base rate.

3. Discuss the potential conflicts between the Bank of England’s objective of maintaining price stability while supporting economic growth using evidence from the article to support your answer.