Interest rates have officially been cut by the Bank of England throughout the remainder of 2025.
In February, the current rate was set by The Bank’s Monetary Policy Committee to 4.5%. Now, however, rates have been cut to 4.25%; this is the lowest level of rates since May 2023.
The interest rate, set by the Bank of England, sets the cost of borrowing money for other banks and building societies. Higher interest has the knock-on effect of higher costs of mortgage and loan payments for consumers.
As a result, interest rates are increased and cut according to inflation rate. Inflation shows the increase of the price of products over time. The rate of inflation is currently at 2.6%, with a target of 2%, and so the Bank of England has less motivation to encourage individuals to spend significantly less.
Therefore, with inflation at its current rate and with interest decreasing further, consumers will be encourage to spend more, positively impacting SMEs.
Despite inflation sitting slightly above target, the uncertainty and chaos caused by the United States’ economic policy has meant that interest rates may drop to boost the economy, in light of the new challenge of tariffs to UK businesses.
Andrew Bailey – governor of Bank of England – had previously stated he would gradually decrease rates, however analysts report rates could fall as low as 3.5%.
At AJL Finance, I provide SME business loans to help companies galvanise on opportunities within the ever-changing UK economy, such as increasing consumer spending. Reach out today and see how I can help your business.
