Image source, Getty Images

When pressed for more detail on the committee's unprecedented second vote to reach a decision, Bailey says it was "sensible to get a clear outcome".

He's also asked if the possibility of tax rises in the chancellor's Autumn Budget will further dampen economic growth.

Bailey responds that he will not speculate on what the government may or may not do, adding that the Bank will make any relevant decisions once the government announces its Budget.

For context, this was the first time since the committee was formed in 1997 that a second vote had to be held, which resulted in a five to four decision in favour of a cut to interest rates.

Dearbail Jordan
Reporting from the Bank of England

Bailey is asked about Donald Trump’s attacks on US Federal Reserve chair Jerome Powell.

The US President has spent months attacking the head of the US central bank on social media and in remarks to reporters, calling Federal Reserve chairman Jerome Powell names like "numbskull".

He has repeatedly floated the possibility of firing Powell, only to quickly disavow the idea.

Bailey wasn't drawn into the drama but he does say that Powell is a good friend and a man of “utmost integrity”. I respect him very much, says Bailey.

The news conference has come to an end, but we'll continue to bring you the key lines.

The Bank is still committed to producing the forecast inflation rate of 2%, Bailey says, but he accepts that there are "real risks" around achieving that target.

Clare Lombardelli, one of Bailey's deputies, adds that the Bank is moving away from the forecast being the "central input into the process". She adds that the forecast still remains a "very good baseline" for discussions on what the Bank does.

Image source, Getty Images

Bailey is now asked whether or not the Monetary Policy Committee are concerned about an increased risk of recession in the UK.

In response, Bailey says this was "not something we spent time discussing explicitly" - and that his own vote to cut rates was "not motivated by concerns of a risk of recession".

He adds that the committee's view of the prospect of UK's growth has changed "very little" since its last report in May - which predicted modest growth in the economy overall.

As a reminder, a recession is defined as two successive quarters of economic decline - as measured by GDP. Economic theory says that lowering interest rates can help boost economic growth by allowing businesses and individuals to borrow money more easily - and therefore have a better capacity to spend.

The next question comes from the BBC's economics editor, Faisal Islam, who asks if interest rates are definitely still on a downward path?

In response, Bailey appears optimistic, saying that he does believe the path will continue downwards.

However, Bailey adds there is "genuine uncertainty about the course of the direction of rates and the path has become more uncertain" for interest rates in the future.

He suggests the question now is how the Bank will continue making cuts and how long it will take to continue on the downwards path.

Image source, Getty Images

The Bank of England governor is now taking questions from journalists in the room.

One asks: How much impact is the government having on this decision?

The journalist adds that the chancellor, Rachel Reeves, says that the government has returned stability to the economy. They ask Bailey if he is saying today that the government has made that decision harder.

Bailey says there's been a number of "small-ish" contributions to the decisions, both global and domestic.

Bailey goes on to explain other factors that influenced the Bank's decision to cut interest rates today.

Among them, he says, is that a margin of slack has opened up - this refers to the amount of resources in the economy that are not used.

Bailey says real household incomes have risen in the past year, but consumers remain more cautious than usual.

And another factor, he adds, is how slack - resources not used in the economy - interacts with inflation and getting it to the much-desired 2% target.

Michael Race
Business and economics reporter

Two words you hear a lot from the Bank of England have been repeated today when it comes to lowering interest rates.

Governor Andrew Bailey says the decision to cut rates for the fifth time since August last year was "finely balanced" although he thought they were still on a downward path.

"But any future rate cuts will need to be made gradually and carefully," Bailey said.

Kicking off the news conference, Bank Governor Andrew Bailey says that domestic prices and wage pressures have "generally continued to abate in recent months". He says this has allowed the committee to reduce interest rates today.

But, he says the "wider picture is more complex".

The Bank had been expecting this move, he explains, and adds that they expect inflation to increase to around 4% in September.

Bailey says the Bank still hopes to cut inflation to 2% in the future, so it is important not to cut interest rates "too quickly or by too much".

He describes how today's decision was informed by three judgements.

Among them, he says that disinflation - a decrease in the rate prices of things are rising - is generally continuing, albeit to different degrees.

Bailey says that the largest factor behind rising inflation has been energy prices, but he suggests that there is good reason to believe this won't continue.

As a result, pressure is easing, "albeit gradually", he concludes.

He adds that higher food price inflation has also contributed to higher inflation, and that inflation will be held in the coming months by a number of increases, such as water bills and vehicle excise duties.

Dearbail Jordan
Reporting from the Bank of England

Image source, Pool

The Bank of England's news conference has just started.

Governor Andrew Bailey is answering questions alongside two of his deputies – Clare Lombardelli and Sir Dave Ramsden.

Expect lots of questions about food inflation, stay with us for their answers.

Faisal Islam
Economics editor

This vexed question is why the proceedings of the Bank’s nine member committee were so close, with a never-before-seen second vote.

The bottom line is that, just about, the Bank sees medium term inflationary pressures from the jobs market as calmer.

But the Governor and his team will have some explaining to do, as inflation remains high. There are risks around an expected further cut in November.

The bigger question is why this series of cuts have not boosted the economy more dramatically.

The latest growth figures, to be revealed next week, are expected at just 0.1%, but thereafter Bank does predict the economy will pick up, partly on the back of the PM’s trade deal with the US.

The notable economic factor has been the very high rate of savings in the economy - essentially consumers have not felt confident enough to spend.

The general negative vibe, not helped by what was a rather downbeat drumbeat from Government last year, does appear to have held consumers back. If spending hoses back to normal, and savings rates decline, then the Bank predicts a notable improvement in economic growth, eventually.

But the lingering suspicion that inflation has not quite been defeated remains.

Image source, Reuters

As our business and economics reporter has just said, this was a knife-edge vote. Here's a closer look at what this means.

The committee of nine was forced to hold two votes for the first time in its history. Four of the committee initially wanted rates to be reduced to 4%, while four other members wanted to keep rates unchanged and the final member wanted a bigger 0.5 percentage cut.

As a result, the committee was forced to hold a second vote to reach a majority, which resulted in the decision to cut rates to 4%.

The Bank's governor Andrew Bailey calls it a "finely balanced decision".

"Interest rates are still on a downward path, but any future rate cuts will need to be made gradually and carefully," he adds.

Michael Race
Business and economics reporter

For those of us who watch these decisions closer than others, today's vote was dramatic.

The nine member committee voted 5-4 for the cut, after an unprecedented second vote, reflecting one economist who had wanted a bigger half a per cent cut.

Image source, Reuters

Chancellor Rachel Reeves has just reacted to the Bank of England's decision, noting that since Labour took office last summer "interest rates have been cut five times and are now at their lowest level for two years".

She says this means the cost of mortgages and loans in the UK are falling.

"By bringing stability back to the country's finances we're putting more money in people's pockets," Reeves adds.

As a reminder, the Bank of England makes its decisions independently to the government.

Michael Race
Business and economics reporter

It's the question we all ask, but the answers depend a lot on your individual circumstances.

Broadly speaking, borrowing money now will be slightly cheaper and returns on savings will not be as high.

What about those who have a mortgage?

Mortgage rates are often one of the first things a lot of people mention of when interest rates are decided, but to put it into context, only a third of people have a mortgage.

And the vast majority of mortgage holders are on fixed deals, so there’s no change for them.

Those looking to buy a home or coming to the end of a fixed deal will likely be watching today’s news closely, but given the markets expected a cut today, the reductions are typically priced in to fixed deals on offer already.

People with tracker mortgages, which are loans that rack the Bank’s base rate, could see an immediate reduction on monthly repayments. There about 600,000 people who have one.

For example, the cut in rates means repayments on an average standard variable rate mortgage of £250,000 over 25 years will fall by £40 per month, according to financial information company Moneyfacts.

The impact on savings

When it comes to impact on savings, today’s decision will spell “further misery”, according to finance expert at Moneyfacts, Rachel Springall.

Average rates across easy access and notice accounts have been falling since the start of August 2024.

The financial experts suggest shopping around for the best deal. “Switching savings accounts must become a regular habit to ensure savers are not getting a paltry rate,” adds Springall.

Michael Race
Business and economics reporter

The Bank of England has cut interest rates to 4%, taking the cost of borrowing to the lowest level for more than two years.

The cut, from 4.25%, is the fifth the Bank has announced since last August.

While the fall in interest rates was widely-expected, the pace of price rises remains above the Bank of England's 2% target.

In just a few minutes we're expecting the Bank of England to release its decision on interest rates.

As we've been reporting, the Bank is expected to announce a cut in interest rates from 4.25% to 4% - we'll find out if this prediction is correct at 12:00 BST.

Once we have the decision our experts will tell you what it means for your money, stay with us.

Michael Race
Business and economics reporter

The interest rate set by the Bank of England today essentially dictates the rates high street banks and lenders set for mortgages, credit cards and other loans.

That means, when they go up they tend to rise in line, and when the fall they come down.

People with tracker mortgages, which are loans that track the Bank’s base rate, could see an immediate reduction on monthly payments if the Bank decides to cut rates. There are about 600,000 people in the UK on such mortgages.

However if you’re on a fixed mortgage deal, you won’t see any change, as the interest is fixed until the deal expires.

Saying all that, many homeowners are still facing a steep rise in mortgage repayments as deals agreed before the sharp spike in interest rates in 2021 come to an end.

Michael Race
Business and economics reporter

The latest UK mortgage and saving rates (on average) for today have just dropped.

The average two-year fixed mortgage rate is 5%, which is marginally lower than the average five-year deal at 5.01%, according to financial information company Moneyfacts.

That means short-term mortgage deals now typically offer the cheapest rates for homeowners for the first time in nearly three years.

September 2022 was the last time this was the case - so this marks a return to relative normality for the mortgage market after what has been a turbulent few years.

When it comes to savings, the average one-year fixed cash Isa rate today is 3.94% and the average easy access Isa rate is 2.90%.

Raphael Sheridan
Economics producer

Alastair Henman, co-founder and managing director of Wolverhampton fencing company Zaun, says interest rates edging down to 4% would be “helpful” for business - but that a 0.25 percentage point rate cut “isn’t going to make a world of difference.”

“Higher interest rates definitely affect our investments,” he says.

“It's a combination of those rates dropping, say, another 0.5%, 1%, and a bit of an improvement in business confidence to get things moving.”

While he would prefer interest rates came down more quickly, Henman says he understands the Bank of England has "got a balancing act to make” between interest rates and inflation – the rate at which the price of goods and services increases.

“If inflation remains high, then that's also not much good. So it is a balance between the two,” Henman says.