BoE cuts rates again — here’s what it means for your money

A new cut

The Bank of England reduced the interest rate by 0.25%, bringing it down to 4%, the lowest level in two years (as reported in Stratibites last Thursday). This has been the fifth cut since last August, and it came after what was called “an unprecedented second vote by the Monetary Policy Committee” (MPC) as they failed to reach a consensus in the first round of voting.

Why this matters

The Bank of England’s base rate is the interest rate it pays commercial banks for holding money with them. This sets the tone for what banks charge borrowers and pay savers. Set by the MPC, any change to this rate is designed to control inflationary pressures and meet the inflation target. [i]

When the rate is reduced, it is usually to stimulate the economy during periods of slow growth. When rates drop, borrowing gets cheaper and savings accounts pay less. This encourages people to spend more or invest elsewhere for better returns, boosting demand for goods and services, which can help growth, but if supply can’t keep pace, it may also push prices up.

This is where inflation comes in…

Right now, with inflation at 3.6% and well above the BoE’s 2% target, this decision has caused concern. This is further exacerbated by the growth data since the latest data published by the Office of National Statistics indicated that the UK grew by 0.7% for Q1-2025, and the expectation is that for Q2 the number will be closer to 0.1%. If inflation remains persistent, and growth does not pick up as expected, the UK might be entering a challenging period of Stagflation.

What does a new rate mean for your investments?

If you’ve got a savings account or Cash ISA, expect a note from your provider (if you haven’t received one already) telling you the interest rate is heading south. But the ripple effects from the rate decision extends past the cash products.

These are a few things the Stratiphy team thinks you should keep an eye on:

• Stocks and shares: Lower cash returns might push more people towards Stocks & Shares ISAs or general investment accounts in search of higher yields.
• Bonds: Falling rates can lift bond prices, but if inflation remains “sticky”, the real value of those gains could shrink. This can make inflation-linked bonds more appealing.
• Property: Cheaper mortgages could push more buyers into the market, potentially pressuring up house prices.

A systematic approach to opportunities

At Stratiphy, we know the markets are complex and big-picture economic decisions aren’t always straightforward to read. The Bank of England’s decision, for instance, can have many more effects besides the ones described here. That’s why our systematic strategies are built to give you a professional-grade toolkit to help you navigate the stock market with confidence.