
After the second interest rate cut of the year so far, the question turns to how many more we could see by the end of 2025.
At a glance:
- The Bank of England has cut rates by 0.25% following its May policy meeting. The new Bank Rate is 4.25%.
- Market surveys indicated investors were highly confident that the rate cut would happen.
- Forecasts suggest that as many as three further rate cuts are expected in 2025.
What happened today, and why?
The Bank of England met widespread expectations for a Bank Rate cut of 0.25% on 8 May. This took the rate from 4.50% to 4.25%. However, the vote was not entirely clear cut. Seven of the nine Monetary Policy Committee (MPC) members voted to reduce the Bank Rate: five members calling for a 0.25% cut and two for a larger 0.50% reduction. Two members voted to leave rates unchanged.
Chart 1: Bank of England Bank rate since 2020

Source: Macrobond, Nutmeg
Messaging from the MPC has remained largely consistent in its last few summaries of monetary policy. The abridged version is that, although the MPC has recently seen inflation move in the right direction, inflationary pressures have been trickier to subdue than hoped, while UK economic growth also faces a number of headwinds. The committee noted in its minutes from the May meeting that based on its "evolving view of the medium-term outlook for inflation, a gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate."
Tariffs and their potential impact have dominated headlines for weeks. In relation to the uncertainty of the US' ongoing trade negotiations, the MPC cautioned that "prospects for global growth have weakened", albeit that "the negative impacts on UK growth and inflation are likely to be smaller".
The MPC acknowledged that global trade developments since its March meeting were an influence, but it was noted that "the current impact of the global trade news should not be overstated", and that for some members "even in the absence of the latest global news, the case for a reduction in Bank Rate at this meeting had been fairly clear".
The Nutmeg investment team's view
While this decision confirms what many expected and will be welcomed by borrowers, it shouldn’t mask the fragile state of the UK economy. Growth forecasts have been downgraded this year, while services inflation remains a challenge. Policymakers will hope this week’s rate cut will feed through and stimulate growth, as events are evolving quickly.
The big question is: how many further rate cuts will we see this year? Market data in the hours after the announcement suggests that investors expect as many as three further cuts from the MPC, out of the five meetings that remain in 2025.
We see the possibility that the Bank of England may opt to cut once per quarter as a measured response to the expected ongoing fall in inflation, while also looking to preserve growth in the economy. It is revealing that the committee members were so divided on what decision to make this week. Much of the future path for rates depends on where inflation settles. Alongside a recent fall in oil and gas prices, markets are waiting to see if tariffs will actually result in lower prices for UK consumers due to the redirection of goods away from the US. Lower prices can provide the space for the central bank to lower rates further and meet market expectations, but the jury is still out.
Risk warning
As with all investing, your capital is at risk. The value of your investments with Nutmeg can go down as well as up and you may get back less than you invest. Past performance and forecasts are not reliable indicators of future performance. We do not provide investment advice in this article. Always do your own research.