Interest rates cut to 4.5%

Interest rates have been cut by just a quarter percent from 4.75% to 4.5% by the Bank of England today, given the current weakness in the UK economy which has seen growth slow down.

The Bank of England uses interest rates as its main tool for controlling inflation, which is currently above target. Inflation unexpectedly dipped at the end of last year, raising expectations of an interest rate cut.

Inflation is forecast to rise again though, partly due to changes brought about in Labour's recent Budget, as well as the uncertainty around US President Donald Trump's threatened use of tariffs against the EU and the UK.

For those with a mortgage, it's likely to result in lower rates, although fixed rates are not expected to change significantly because the market had already priced this in to existing deals.

Markets appear to be pricing in two or three more interest rate cuts this year, taking the base rate from 4.75% to 4% at best. However some financial forecasters have suggested as many as five rate cuts in 2025, which would bring the base rate down to 3.5%.

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