The dissenting members preferred to leave rates unchanged at 4.25 per cent.

“We’ve cut interest rates today, but it was a finely balanced decision. Interest rates are still on a downward path, but any future rate cuts will need to be made gradually and carefully,” Andrew Bailey, the head of the Bank of England, said.

UK chancellor of the exchequer Rachel Reeves said the government is putting more money in people’s pockets, but the Conservatives said rates should be falling faster.

Here are some reactions from investment managers to the cut.

Nicholas Hyett, investment manager at Wealth Club
“The Bank’s Monetary Policy Committee has launched a pre-emptive strike on any economic downturn later in the year. It remains unsaid in these minutes, but the increasing likelihood of tax hikes and/or spending cuts at the Autumn Budget has also probably played a part in this “finely balanced” decision. Both consumers and companies could see their pockets squeezed by the taxman, and that would have knock-on effects for economic growth.

“While inflation is expected to rise a bit in September, the bank believes it will fall back towards the 2 per cent target from there. That’s opened up the space for today’s pre-emptive action. The market seems to be suggesting there could be another cut later this year – and with one member of the MPC already arguing in favour of a move to 3.75 per cent you can see why. It feels like we’re entering a wait-and-see phase. Does this rate cut give the economy a little bit of extra umph it badly needs, or will the Bank need to act again come the Budget? Time will tell.”

Joaquin Thul, economist at EFG Asset Management
“The minutes from the meeting reflected that the deceleration in core services price pressures and softening of wage growth has continued, although to different degrees. Activity levels have been weak, consistent with a loosening in the labour market and offset the strong growth in the first quarter of 2025. The latter was attributed to domestic front-loading ahead of expected rises in taxes and international tariffs. The MPC increased their expectations for CPI inflation in the coming months; expecting prices to peak at 4 per cent in September, rather than 3.75 per cent, as reflected in the previous Monetary Policy Report in May. Therefore, they decided to maintain the references in the minutes to the need for a gradual and careful approach to the further withdrawal of monetary policy going forward.

“Overall, the decision to cut rates by 25 bps was widely anticipated by markets. However, the narrow vote among MPC members was a surprise and reflects the challenges faced by policymakers at the BoE given differences in the data. Therefore, it would not be surprising to see a more hawkish approach in the coming months, as MPC members will need to see a significant progress in the data before cutting rates again. As such, given that inflation is expected to increase to double the target level in September, it would not be surprising to see a pause in the loosening of monetary policy at the next meeting in September.”

Ed Monk, Fidelity International
“The doves at the Bank of England have won out  for now. Ahead of the decision today, the gilt market was predicting rates to fall below 3.5 per cent within 12 months – suggesting three more quarter-point reductions over the next year following the cut today. However, the closeness of the five-to-four vote split on the MPC – with one member initially favouring a larger half-point cut – confirms the high degree of uncertainty around those expectations.

“Inflation has surprised to the upside recently. The Bank’s own forecast from May suggested that inflation would hit 3.7 per cent by September before falling away. That has now been revised higher to 4 per cent. The consumer price index (CPI) rose by 3.6 per cent annually in July, meaning we’re approaching that predicted peak. The reading in August will be watched very closely. The weakening jobs market could alter the thinking among MPC members. Vacancies have been falling and employers are reporting their reluctance to replace workers who have left. That has the potential to reduce demand in the economy and pull inflation down further and faster. Pay growth is running at 5 per cent, however, and several MPC members are clearly concerned that this will feed through to higher inflation.

“The cut in rates further diminishes the appeal of cash savings – especially with inflation remaining well above the Bank’s 2 per cent target. Our own customer data show that cash and cash-like investments have soared in popularity over the past few years in line with the sharp rise in interest rates that followed the peak in inflation in 2022. Cash and money market funds were among the best-sellers for Fidelity Personal Investing customers in the first half of the year, although their popularity began to wane in July. There is also evidence, however, that some are looking further afield for their income as rates on cash fall. Funds targeting regular dividends also returned to the best-sellers’ list last month.”

Oliver Jones, head of allocation at Rathbones
“We expect the Bank of England to keep cutting interest rates once a quarter into next year. Despite the recent concerns about the quality of the data, it's increasingly clear that the UK labour market is weakening with jobs vacancies generally below pre-pandemic levels and numbers of employees clearly falling.  

“For these reasons we expect the Bank to keep loosening rates, despite inflation being well above 3 per cent. The biggest risk to this would be any evidence that inflation will not fall back as fast as expected next year. Changes in government policy such as higher National Insurance and wage increases have kept services inflation in the 4.5 to 5.5 per cent range for months but further increases, and food inflation running at 5 per cent are also headaches for the MPC.” 

Charlotte Kennedy at Rathbones
“Financial plans should always have a degree of flexibility to accommodate changes in interest rates. The recent cuts will ease some of the cost pressures facing those nearing the end of their fixed-rate mortgage deals – many of whom secured ultra-low rates during the historic lows of recent years. This shift could also unlock a wave of would-be buyers who have been waiting in the wings, hoping for affordability to improve so they can take that first step onto the property ladder. 

“The reverse is true for savings rates which are increasingly languishing behind inflation, eroding savings in real terms. For those with the financial means and a long enough time horizon – typically five years or more – investing offers the potential for inflation-beating returns and a more robust route to growing wealth over the long term.” 

James Tothill, investment specialist at Wesleyan
 “While it was generally expected that interest rates would fall this year, what’s becoming clear is that they’re staying higher, for longer, than markets previously forecast – mainly due to sticky inflation. The challenge for savers is uncertainty. This is another opportunity for advisors, and advice firms, to highlight the value of maintaining a long-term view and having a plan that is prepared to keep savers on track for good outcomes, whatever happens.”

Michael Metcalfe, head of macro strategy at State Street Markets
“With four dissenters, the future descent of UK interest rates remains in doubt. With online prices still pointing to an acceleration of annual inflation through August, the MPC’s doubters look unlikely to be assuaged any time soon unless fiscal policy gets notably more contractionary.”

George Brown, senior economist at Schroders
“Today's rate cut is no surprise, but the path forward is anything but clear. Jobs, growth and inflation figures all call for different policy prescriptions, as reflected in the unprecedented two rounds of voting needed to reach a majority. Given the uncertainty presented by the conflicting data, the committee is right to stick to its “gradual and careful” mantra. Nervousness about the labour market might prompt another cut in November. But this will be difficult to justify unless disinflation is clearly underway. As such, we think there is a decent chance rates will not fall below the current rate of 4 per cent this year."

Neil Wilson, investor strategist at Saxo UK
“It's about time the Bank got on with it.  A cut was a done deal, but the question now is how far does the Bank of England go – while today's cut was easy, it gets harder from here. Our inclination is that the BoE needs to cut further than the market has been expecting, perhaps as low as 3 per cent, vs the 3.5 per cent priced ahead of this decision. Demand-driven inflation is not really the issue as tax hikes will continue to squeeze spending. 

“The calculation for the Bank is not straightforward – but it seems right to err on the side of caution given the precarious economic outlook and fiscal situation. Unemployment has risen above the Bank’s forecasts and growth is weaker. Latest data for June showed that the unemployment rate rose to 4.7 per cent in the three months to May, the highest level since June 2021. But services inflation, a key one for the BoE, remains stubbornly high at 4.7 per cent. That is above even the level expected by the BoE coming into the autumn. Headline inflation has also ticked up to 3.6 per cent but the BoE was anticipating inflation to pick up through the year. 

“Governor Andrew Bailey gave a strong signal to the market two weeks ago by saying that he believes “the path is downward” on rates. On the whole, while we favour the Federal Reserve seeing inflation further away from target than employment, the Bank of England is on the other side with the labour market and slowing growth the key concerns. It is also no doubt fully aware that tax hikes are coming, which will further squeeze the economy, jobs and spending power.”

Neil Birrell, chief investment officer, Premier Miton Investors
“The base rate is at a level we’ve not seen for well over two years, but the voting by the committee only just got the cut through. The question now may be whether this cut has come too late. Growth has been weak for some time, the jobs market is under pressure from higher employment costs, tax rises are on the horizon, consumer spending is lacklustre, and confidence is low. Also, the cut is priced into gilts so government borrowing costs won’t now be falling. Now we are on the path to lower rates, it’s all about future policy, and the inflation versus growth challenge hasn’t gone away. From this vote it’s not clear whether economic growth will be a focus.”

Luke Bartholomew, deputy chief economist, at Aberdeen
“An interest rate cut today was almost universally expected, except it seems at the Bank of England itself where the voting patterns reveals a very close decision, which required a second round of voting before a majority could be found. The tight decision reflects the conflicting forces facing policymakers, with inflation proving stronger than expected but activity growth remaining weak. It will be difficult for the Bank to give clear guidance about the likely path of rates from here given the messy data and divided MPC.  But in the end, we expect the weakness of growth to win out, and for the Bank to cut rates again later this year, and then through next year as well.”  

Andy Jones, Janus Henderson
“As was widely expected, and with a split vote, the MPC lowered the UK bank rate by 0.25 per cent to 4.0 per cent. While inflation has remained elevated, the labour market has weakened over the last few months and economic growth has been lacklustre. We still expect further cuts in due course but would anticipate a hold in rates at September’s meeting as the committee members await clearer signals on inflation from the data.”