London Daily

Focus on the big picture.
Thursday, Sep 18, 2025

Interest rate raised by half a point to 2.25%, the highest level since 2008

Interest rate raised by half a point to 2.25%, the highest level since 2008

The latest update from the Bank suggests a greater concern about growth in the economy as it defies market expectations of a bigger leap in rates to combat inflation and support the pound.

The interest rate has been raised to 2.25% - the highest level since the 2008 financial crisis.

The Bank of England's half a point hike followed a three-way split in the voting.

Financial markets had widely expected the Bank to follow the US Federal Reserve last night with a 0.75 percentage points rise but economists were slightly more cautious.

The Bank signalled on Thursday that it was now more concerned about the prospects for economic growth.

It warned that the country could already be in a technical recession, saying that its staff now believed the UK was on course to record a second consecutive quarter of negative growth.

It had forecast just last month that the economy would grow by 0.4% between July and September.

But it said that the additional Bank Holiday for the day of the Queen's funeral could now contribute to a negative growth figure for the three-month period.

The minutes of the Bank's rate-setting committee contained one piece of good news; that the government's energy bill support would now mean inflation not rising in October by as much as initially expected.

It believed the consumer prices measure would come in at just under 11% from the current 9.9%.

The bank's last forecast predicted a figure above 13%.

The easing in near-term inflation expectations were also seen as a factor behind the decision not to go for the larger rate increase.

However, the 0.50 percentage points rise still places further intense pressure on borrowers, such as mortgage holders, as variable rates and new fixed-rate loans continue to head north.


The Bank's action is aimed at tackling core inflation - which strips out more volatile elements such as petrol and energy prices - that is still on the rise amid the cost of living crisis.

The main consumer prices index (CPI) measure fell back in August but that was only thanks to fuel costs plunging in the previous month.

The bank is worried that other elements of inflation, spikes in the cost of goods and services more generally, are becoming more engrained.

Policymakers said they would continue to "respond forcefully, as necessary" to tackle inflation.

While any action to keep a lid on the pace of price rises will be broadly welcomed by the government, financial markets are likely to question not only the speed of the Bank's tightening but also the Truss administration's approach to stimulating economic growth through tax cuts and energy bill bailouts for households and businesses.

Investors are worried about the levels of government borrowing ahead.

The rates demanded to hold UK government bonds have risen steadily to 11-year highs in recent weeks while the pound is at a 37-year low against the dollar, though much of the decline reflects US currency strength.

It lost some of the tentative gains made earlier in the day against the dollar but was still trading at $1.13 (£1) following the Bank's remarks.

On Friday, chancellor Kwasi Kwarteng will give more detail about the government's fiscal plans, which may amount to more than £150bn of stimulus.

The bank said it would assess the implications of this, for monetary policy, at its November meeting.

Newsletter

Related Articles

0:00
0:00
Close
Macron and his wife to provide 'scientific photographic evidence' that she is a real woman
US Tech Giants Pledge Billions to UK AI Infrastructure Following Starmer's Call
Saudi Arabia cracks down on music ‘lounges’ after conservative backlash
DeepMind and OpenAI Achieve Gold at ‘Coding Olympics’ in AI Milestone
SEC Allows Public Companies to Block Investors from Class-Action Lawsuits
Saudi Arabia Signs ‘Strategic Mutual Defence’ Pact with Pakistan, Marking First Arab State to Gain Indirect Access to Nuclear Strike Capabilities in the Region
Federal Reserve Cuts Rates by Quarter Point and Signals More to Come
Effective and Impressive Generation Z Protest: Images from the Riots in Nepal
European manufacturers against ban on polluting cars: "The industry may collapse"
Sam Altman sells the 'Wedding Estate' in Hawaii for 49 million dollars
Trump: Cancel quarterly company reports and settle for reporting once every six months
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
US Launches New Pilot Program to Accelerate eVTOL Air Taxi Deployment
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
Hong Kong Industry Group Calls for HK$20 Billion Support Fund to Ease Property Market Stress
Joe Biden’s Post-Presidency Speaking Fees Face Weak Demand amid Corporate Reluctance
Charlie Kirk's murder will break the left's hateful cancel tactics
Kash Patel erupts at ‘buffoon’ Sen. Adam Schiff over Russiagate: ‘You are the biggest fraud’
Homeland Security says Emmy speech ‘fanning the flames of hatred’ after Einbinder’s ‘F— ICE’ remark
Charlie Kirk’s Alleged Assassin Tyler Robinson Faces Death Penalty as Charges Formally Announced
Actor, director, environmentalist Robert Redford dies at 89
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
JD Vance Says There Is “No Unity” with Those Who Celebrate Charlie Kirk’s Killing, and he is right!
Trump sues the 'New York Times' for an astronomical sum of 15 billion dollars
Florida Hospital Welcomes Its Largest-Ever Baby: Annan, Nearly Fourteen Pounds at Birth
U.S. and Britain Poised to Finalize Over $10 Billion in High-Tech, Nuclear and Defense Deals During Trump State Visit
China Finds Nvidia Violated Antitrust Laws in Mellanox Deal, Deepens Trade Tensions with US
US Air Force Begins Modifications on Qatar-Donated Jet Amid Plans to Use It as Air Force One
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
Elon Musk Retakes Lead as World’s Richest After Brief Ellison Surge
U.S. and China Agree on Framework to Shift TikTok to American Ownership
London Daily Podcast: London Massive Pro Democracy Rally, Musk Support, UK Economic Data and Premier League Results Mark Eventful Weekend
This Week in AI: Meta’s Superintelligence Push, xAI’s Ten Billion-Dollar Raise, Genesis AI’s Robotics Ambitions, Microsoft Restructuring, Amazon’s Million-Robot Milestone, and Google’s AlphaGenome Update
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Musk calls for new UK government at huge pro-democracy rally in London, but Britons have been brainwashed to obey instead of fighting for their human rights
Elon Musk responds to post calling for the murder of Erika Kirk, widow of Charlie Kirk: 'Either we fight back or they will kill us'
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
USA: Office Depot Employees Refused to Print Poster in Memory of Charlie Kirk – and Were Fired
Proposed U.S. Bill Would Allow Civil Suits Against Judges Who Release Repeat Violent Offenders
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
French Debt Downgrade Piles Pressure on Macron’s New Prime Minister
US and UK Near Tech, Nuclear and Whisky Deals Ahead of Trump Trip
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
Anesthesiologist Left Operation Mid-Surgery to Have Sex with Nurse
×