BoE Press Conference: Governor Bailey speaks on policy outlook after lowering bank rate by 25 bps

Bank of England (BoE) Governor Andrew Bailey explains the decision to lower the policy rate by 25 basis points to 4.5% at the February meeting and responds to questions from the press.

BoE press conference key takeaways

"We expect to be able to cut bank rate further but we will have to judge meeting by meeting how far and how fast."

"Road ahead will have bumps."

"Behind uptick in headline inflation stands a continued, gradual easing of underlying inflationary pressures."

"This is the backdrop to our withdrawal of restrictiveness, and to our decision today."

"Coming rise in inflation almost entirely due to factors not directly linked to pressures in the UK economy."

"We expect these factors to be temporary."

"Monetary policy cannot prevent short-term influences on headline inflation, nor should monetary policy respond to factors that will fade by the time policy takes effect."

"Short-term pick-up in inflation introduces some further uncertainty into near-term inflation outlook."

"Consumers are more price conscious and holding back on spending."

"Unclear what form global trade policies will take."

"We must judge in future meetings whether underlying inflation pressures are easing enough to allow further cuts."

"Bank rate is not on a pre-set path."

"We must proceed carefully."

"We continue to use "gradual" because we still need to see disinflation take place."

"You can conclude productivity has got much worse."

"It would be unusual for poor productivity situation to remain."

"Government growth agenda will not come through quickly but we are supportive."

---

This section below was published at 12:00 GMT to cover the Bank of England's monetary policy decisions and the immediate market reaction.

The Bank of England (BoE) announced on Thursday that it cut the policy rate by 25 basis points (bps) to 4.5% following the February policy meeting, as expected. Policymakers voted 7-2 in favor of the decision. External Monetry Policy Committee (MPC) members Dhingra and Mann voted to cut rates by 50 bps.

Follow our live coverage of the Bank of England interest rate decision and the market reaction.

BoE policy statement highlights

"UK CPI inflation to peak at 3.7% in Q3 2025 (Nov: peak at 2.8% in Q3 2025), returns to target in Q4 2027."

"We will take a gradual and careful approach to reducing rates further."

"BoE forecasts GDP growth in 2025 0.75% (Nov. forecast: 1.5%), 2026 1.5% (Nov: 1.25%), 2027 1.5% (Nov: 1.25%), based on market rates."

"Market rates imply less boe loosening than in November, show bank rate at 4.2% in Q4 2025 (Nov. forecast: 3.7%), 4.1% in Q4 2026 (Nov: 3.7%), 4.0% in Q4 2027 (Nov: 3.6%)."

"MPC members express range of views on economic outlook."

"First view among majority: disinflation on track after looking through near-term pickup in inflation, warrants gradual and careful approach."

"Second view among majority: pay, inflation pressure and weak growth reflect supply constraints, warrants gradual and cautious rate cutting."

"One member who voted for larger rate cut sought activit signal on appropriateness of UK financial conditions, said rates still need to stay restrictive for some time."

"BoE forecast shows CPI in one years' time at 3.0% (Nov. forecast: 2.7%), based on market interest rates and modal forecast."

"BoE forecast shows CPI in two years' time at 2.3% (Nov. forecast: 2.2%)."

"BoE forecast shows CPI in three years' time at 1.9% (Nov. forecast: 1.8%)."

"BoE estimates GDP -0.1% QQ in Q4 2024 (Dec. forecast: 0.0%), sees +0.1% QQ in Q1 2025."

"BoE forecasts unemployment rate in Q4 2025 4.5% (Nov: 4.1%); Q4 2026 4.7% (Nov: 4.3%); Q4 2027 4.8% (Nov: 4.4%)."

"BoE estimates private sector wage growth ex-bonuses in Q4 2025 3.75% (Nov: 3.25%); Q4 2026 3.0% (Nov: 3.25%); Q4 2027 3.0% (Nov: 3.0%)."

"MPC will ensure that bank rate is restrictive for sufficiently long to return inflation to the 2% target sustainably."

"Monetary policy is clearly restrictive following recent rate reduction, range of views on degree of restrictiveness."

"Significant evidence that equilibrium interest rate (r-star) has risen modestly since 2018, possibly by 25 to 75 basis points."

"Monitoring US tariffs closely, more protectionism would have negative impact on world economy."

Market reaction to BoE policy announcements

GBP/USD came under heavy bearish pressure with the immediate reaction to the BoE's policy decisions and was last seen losing more than 1% on the day at 1.2370.

---

This section below was published as a preview of the Bank of England's (BoE) monetary policy decisions at 07:00 GMT.

• The Bank of England is expected to trim the benchmark rate by 25 basis points.
• Softer UK inflation figures are overshadowed by concerns about slowing growth.
• GBP/USD could resume its bearish trend if policymakers deliver dovish clues.

The Bank of England (BoE) will announce its decision on monetary policy on Thursday after completing the first meeting of 2025. Market participants anticipate policymakers will trim the benchmark rate by 25 basis points (bps) to 4.5% after cutting it by 50 bps throughout 2024. 

But it is not just about interest rates. It’s a BoE Super Thursday, so the central bank will also release the meeting Minutes alongside the Quarterly Inflation Report. Finally, Governor Andrew Bailey will hold a press conference in which he will explain the reasoning behind the policymakers’ decision. 

With a 25 bps interest rate priced in, the focus will then be on the BoE's guidance and economic projections.    

UK: Softer inflation and weaker growth

The BoE surprised market players in December with a hawkish hold, as six out of nine members of the Monetary Policy Committee (MPC) voted to keep rates on hold, while the other three opted for a rate cut. 

Meanwhile, the Office for National Statistics (ONS) reported that the United Kingdom (UK) annual headline inflation edged lower to 2.5% in December from 2.6% in November. Additionally, the annual core inflation rate decreased to 3.2% in December from 3.5% prior, marking the lowest reading since September. More importantly, services inflation hit 4.4% year-on-year (YoY), below the BoE’s projection.

Growth, on the other hand, has been tepid, to say the least. The UK Gross Domestic Product (GDP) registered no growth in the third quarter of 2024, revised down from the first estimate increase of 0.1%, according to the latest ONS report. Q2 was downwardly revised to 0.5% following an initial estimate of 0.6%. The BoE expects zero GDP growth in the last quarter of 2024, downgrading the 0.3% estimate predicted in November.

With the 25 bps interest rate cut fully priced in, the focus will be on the MPC report and Governor Bailey’s speech. UK policymakers will offer an updated assessment of the economy’s potential growth rate, with the latest estimate standing at 1.3%. A downward revision seems likely, which should boost the odds for additional rate cuts in the upcoming meetings, albeit a faster pace of trims seems out of the picture at the moment. 

Additionally, it is worth remembering the recent surge in UK government bonds, so-called Gilts, yields. UK Gilts yields have risen to multi-year highs at the beginning of the year, spurring concerns about government spending and tax decisions. Many analysts link the advance to that of United States (US) Treasury yields following President Donald Trump’s arrival at the White House. 

Nevertheless, yields retreated in the last couple of weeks amid mounting concerns that the economic slowdown would deepen under Trump’s tariff plans. These concerns also fueled speculation the BoE will have no choice but to trim interest rates. 

How will the BoE interest rate decision impact GBP/USD?

As previously mentioned, a BoE 25 bps interest rate cut is fully priced in. With that in mind, the British Pound (GBP) will likely show no reaction to the headline but react to policymakers’ fresh economic projections and how MPC votes. Ahead of the announcement, financial markets anticipate eight of the nine members will opt for a rate trim. Investors will also pay close attention to Governor Andrew Bailey’s words.

Generally speaking, the more dovish the outcome, the more the GBP could fall. The opposite scenario is also valid, with hawkish surprises from UK policymakers boosting demand for the British Pound.

Ahead of the announcement, the GBP/USD pair trades above the 1.2500 mark, recovering from a weekly low of 1.2248. The US Dollar (USD) soared at the beginning of the week as US President Donald Trump announced tariffs on imports from Mexico, Canada and China over the weekend. The subsequent USD decline came after Trump postponed the implementation of such levies, at least on Mexican and Canadian imports.

Valeria Bednarik, Chief Analyst at FXStreet, says: “Central Bank’s decisions and macroeconomic data in general is being overshadowed by US President Trump's decision to unleash a trade war. The UK is not out of Trump’s radar, but it is definitely not among his top rivals. Still, the risk of the UK economic slowdown accelerating amid fresh US tariffs pends on policymakers ahead of the announcement. As for GBP/USD, the pair may resume its slump with a dovish tilt, albeit the reaction could be limited as investors anticipate it. If policymakers sound hawkish, the GBP/USD will likely gain extra upward traction.”

Bednarik adds: “The GBP/USD pair has an immediate resistance level at the 1.2600 threshold, with gains beyond the area exposing 1.266, the December 19 daily high. Beyond the latter, the rally could continue towards the 1.2700-1.2720 area en route to the 1.2800 figure. The 1.2470 price zone provides support ahead of the 1.2400 figure. A break below the latter could see the pair resuming its bearish trend and retesting the aforementioned weekly low at 1.2248.”