Kevin Peachey
Cost of living correspondent

Andrew Bailey says the UK economy is facing some bumps in the road - but to ordinary billpayers they'll seem more like bollards.

Rising water bills and the prospect of higher domestic energy prices will be a worry as people continue to juggle their finances.

Even though mortgage rates may fall, a huge number of people re-mortgaging still won't get as good a fixed deal as their current rate.

The silver lining to these clouds is that Bailey says higher inflation is only temporary, and the broader trend is a slowdown in the rate of rising prices.

He also pointed to earnings rising - although it is worth noting benefit payments will see a comparatively smaller increase in April.

Overall, he says the impact of what's happening on the cost of living "concerns" him, but fears may now be heightened among those without any wriggle room in their financial situation.

At midday, the Bank of England cut interest rates from 4.75% to 4.5% - but that's not all we learned today:

• The Bank's base rate is now at its lowest since June 2023 - and two of the nine committee members voted for a bigger cut
• The Bank also cut its growth forecast for the UK economy from 1.5% to 0.75% for this year
• Inflation is forecast to rise, peaking at 3.7% later this year, which the Bank says is due to increases in the cost of energy, water and bus fares
• The forecasts say inflation will reach the Bank's 2% target towards the end of 2027 - about six months later than previously thought
• On the reduced growth forecast, PM Keir Starmer says: "We were never going to turn this around in six or seven months - that just spurs us on"
• The Conservatives say the "disastrous Budget is likely to mean fewer rate cuts this year than previously anticipated"

We're ending our live coverage soon. You can read our main story here, and a handy explainer here.

Our final post, up next, is from our cost of living correspondent Kevin Peachey. Thanks for reading.

Image source, Reuters

Reform UK's deputy leader, Richard Tice, says the Bank of England should have been "bolder" and cut interest rates by more than 0.25 percentage points today.

"It’s obvious to me and anyone with a basic understanding of economics that a cut of 0.5% today would have made far more economic sense," he says.

He also claims the Bank's latest forecast "confirmed what we all already knew, that Rachel Reeves’ catastrophic budget has harmed growth and left us teetering on the edge of a recession".

If the UK wants growth, he says, the chancellor should "reverse her budget" and the Bank "needs to be bolder and play its part too".

As a reminder, seven of the Bank's Monetary Policy Committee voted for the cut to 4.5% - while two voted for a further cut to 4.25%.

Luke Mintz
World at One reporter

The UK may be entering a period of economic "stagflation", according to a former Bank of England rate-setter.

Jonathan Haskel, who was on the Bank's Monetary Policy Committee until last summer, has been speaking to BBC Radio 4's World at One.

Commenting on the interest rate cut, Haskel says: "It's what the market expected but I’m afraid to say that the forecast can be summarised in one word - which the Governor was unwilling to use, but it’s there I think - which is stagflation.

"The economy is in a difficult position. The Bank’s forecast last year for the economy this coming year was for slow growth but inflation and interest rates coming down. But the new forecast, I’m afraid... is for even slower growth."

Haskel, who is now a professor of economics at Imperial College London, added: "It's a stagflationary prospect and I’m afraid it’s not very pretty.”

Stagflation, a contraction of the words stagnation and inflation, is used to denote periods of high inflation and stagnant economic growth.

Here are some pointers if debt is something you are worried about.

• Talk to someone. You are not alone and there is help available. A trained debt adviser can talk you through the options. Here are some organisations to get in touch with
• Take control. Citizens Advice suggest you work out how much you owe, who to, which debts are the most urgent and how much you need to pay each month
• Ask for a payment plan. Energy suppliers, for example, must give you a chance to clear your debt before taking any action to recover the money
• Check you're getting the right money. Use the independent MoneyHelper website or benefits calculators run by Policy in Practice and charities Entitledto and Turn2us
• Ask for breathing space. If you're receiving debt advice in England and Wales you can apply for a break to shield you from further interest and charges for up to 60 days

Tackling It Together: More tips to help you manage debt

Image source, Getty Images

The Bank of England's downgrading its growth forecast to 0.75% for 2025 "needs to be a wake up call for the chancellor", Liberal Democrat Treasury spokesperson Daisy Cooper says.

“Our economy will never see the back of the years of Conservative economic vandalism if she continues to push ahead with her misguided national insurance hike."

“Rachel Reeves needs to see sense, scrap her national insurance rise, which is hammering small businesses, and jettison her short-sighted red lines on a Customs Union. Only then will we see an end to these putrid growth figures," Cooper says.

She adds that people are still "having to choose between heating and eating and being forced to use public services that are completely broken".

Prime Minister Keir Starmer has said the interest rates decision is "very welcome", and that it means people "will have more money in their pockets".

Speaking to the BBC's Political Editor Chris Mason at the National Nuclear Laboratory in Preston, Starmer notes that wages have also gone up more than inflation.

On the Bank of England's growth forecast, Starmer says the government has more to do. "We were never going to turn this around in six or seven months. That just spurs us on," he says.

"We’re going to turn this around by making the tough decisions, whether that’s on planning. on infrastructure, on nuclear," he says.

"I’m not satisfied with growth as it is. I’m determined we’re going to go further. You can expect to see more announcement like today to turn the economy around."

Starmer announced new rules today to make it easier to build nuclear reactors in England and Wales.

Kevin Peachey
Cost of living correspondent

The UK does not operate in a vacuum, so what happens elsewhere has an impact here.

A week ago, the European Central Bank cut interest rates in the Eurozone from 3% to 2.75%.

That made it five cuts since June last year. Inflation remains relatively high in some countries, but growth has stagnated, including slowdowns in France and Germany.

Meanwhile, the US central bank - the Federal Reserve - kept rates unchanged a week ago. Its chairman, Jerome Powell, said the bank was not “in a hurry” to cut rates owing to economic uncertainty.

That prompted a critical response from US President Donald Trump, who is not shy of criticising the Fed.

Dearbail Jordan
Business reporter

The Bank says it will take a “careful and gradual” approach to future interest rate cuts as it weighs up a number of factors that could affect inflation, including threats of trade tariffs from US President Donald Trump.

In its quarterly inflation report, the Bank says economic growth has been “broadly flat since March last year”.

The UK economy showed zero growth between July and September.

For the following three months, the Bank of England now expects it to shrink by 0.1% against a previous forecast for 0.3% growth.

A recession is defined as two back-to-back three months periods of economic shrinkage.

For the first three months of this year, the Bank now forecasts economic growth of 0.1%, down from its 0.3% forecast published in last November’s inflation report.

Official figures on the UK economy will be published next Thursday.

Inflation is expected to briefly rise to 3.7% later on this year and while the bank expects it to ease, it will take until the latter part of 2027 instead of earlier that year to fall back to the 2% target.

Vishala Sri-Pathma
BBC News

It’s all in the chat.

If there’s one thing markets love, it’s overanalysing every syllable central bankers utter. And today, all eyes (and ears) are on the Bank of England’s language around the pace of interest rate cuts.

The Bank has been clinging to the word "gradual" like a security blanket. For a while now some economists think that’s been code for four cuts in 2025 – a steady but cautious easing of monetary policy. Markets, ever the sceptics, are inching closer to this expectation but haven’t fully embraced that elusive fourth cut just yet.

Global uncertainty, largely trade tensions, particularly around tariffs, could make policymakers hesitant to deviate from their carefully scripted approach, cutting rates every quarter.

But some in the City think there could be room for more. Simon French, Chief Economist at Panmure Liberum thinks there will be six cuts this year, with the pace of cuts ramping up in the summer months.

So, will the Bank change its tune, or will we get another encore of slowly does it?

Dearbail Jordan
Reporting from the Bank of England

The Bank is asked whether it believes its own forecasts, and why is the UK having such a tough time getting inflation down.

Bailey says some factors are very much UK-only such as higher water bills and bus fares.

He also says that the way higher energy prices feed through to consumers is different from country to country

Lucy Acheson
Reporting from the Bank of England

The Bank’s latest Monetary Policy Report highlights that artificial intelligence advancements could "boost" global productivity, increasing capital demand and pushing up real interest rates in the UK.

However, the report says climate change and mitigation policies are expected to have offsetting effects.

Productivity growth could slow due to climate-related disruptions and the need to prioritise green investments.

At the same time, the Bank says higher government spending on climate initiatives is likely to put upward pressure on interest rates.

That's quite a lot of information to take in - let's recap the Bank of England's decision and forecasts:

• Interest rates: The Bank of England cut rates to 4.5% from 4.75%, the lowest since June 2023
• Growth forecast: The Bank slashed its UK economy growth forecast to 0.75% in 2025, down from a previous forecast of 1.5%
• Inflation: The Bank predicts that inflation will rise to 3.7% later this year, driven up by rises in gas prices arising from the need to fill drained storage facilities after a cold winter
• Reactions: Chancellor Rachel Reeves welcomed the interest rate cut but said she is still "not satisfied" with the growth rate of the UK economy
• What the governor said: The Bank's Governor Andrew Bailey gave hints of hope and caution in the press conference that followed the announcement, saying the road ahead "will have bumps on it"

Image source, EPA

Shadow chancellor Mel Stride has said the interest rate cut will be "welcome news for many families and businesses who have been hit hard by Labour's mismanagement".

"Sadly, their disastrous Budget is likely to mean fewer rate cuts this year than previously anticipated," he says.

He adds that under new leadership "the Conservatives will back business and our nation of entrepreneurs to create jobs and wealth".

"That is the only way to grow our economy so everyone can have a more secure future," he says.

Dearbail Jordan
Reporting from the Bank of England

The Bank might have cut its near-term forecasts for growth but, asked what impact Chancellor Rachel Reeves’ recent plans, such as building a third runway at Heathrow will have on the economy, Bailey and Lombardelli say they are “very, very strong supporters of growth”.

They said there would not be any immediate impact of these projects on the UK economy.

It is more likely that the plans, if they go ahead, would serve as a longer-term boost.

In fact, while the Bank has cut its forecasts for 2024 and this year, it expects the economy to surpass its previous expectations in 2026 and 2027.

The economy is forecast to grow by 1.5% in both of those years, up from 1.25%.

Kevin Peachey
Cost of living correspondent

As this graph shows, rates are on a downward trend after a sharp rise so let’s look at what this means for people with a mortgage.

For the 629,000 homeowners on tracker deals that move in line with the base rate, there will typically be a £29 fall in monthly repayments, according to figures from banking trade body UK Finance.

The 693,000 people on the standard variable rate will need to wait for the response of their lender.

However, if their provider matches the base rate fall, typically they will pay £17 less a month.

If you have a fixed mortgage deal, the rate you pay monthly in interest is fixed until the deal expires, so there'll be no immediate change.

But the markets, and lenders will consider the chances of future interest rate cuts and mortgage providers may reprice deals for new and renewing customers accordingly.

Lucy Acheson
Reporting from the Bank of England

The Bank's quarterly Monetary Policy Report (MPC) reported that tariffs and other trade barriers would likely have "adverse effects" on UK activity, though the impact on inflation is "highly uncertain".

The Monetary Policy Committee’s forecast was finalised before President Trump announced new import tariffs on China, Canada and Mexico earlier this week - with the latter two now postponed for a month.

The US is the UK’s second-largest trade partner, after the EU, accounting for 22% of UK exports in 2023.

However, almost 70% of the UK’s exports to the US are services exports, which would not be directly affected by the imposition of US tariffs.

The MPC says it will continue monitoring global trade developments and their implication for UK growth and inflation.

Energy prices drive surprising prediction of inflation risepublished at 12:48 Greenwich Mean Time 6 February

12:48 GMT 6 February

Dearbail Jordan
Reporting from the Bank of England

There was a bit of a shock in the Bank’s quarterly Monetary Policy Report today when it said inflation will spike to 3.7% later in 2025.

How come? It is largely driven by energy prices.

There has been a colder than expected winter in Europe, which has driven demand for natural gas and hiked up prices.

This will impact Ofgem’s energy price in a few months’ time. But things are nowhere near the aftermath of Russia’s assault on Ukraine and the subsequent sanctions on Moscow, which saw energy costs soaring.

Kevin Peachey
Cost of living correspondent

In his opening statement in the press conference, the Bank's governor Andrew Bailey has given hints of hope, and caution.

He says the committee will consider cutting rates again soon, taking a careful approach.

"We expect to be able to cut bank rate further as the disinflation process continues, but we will have to judge meeting by meeting, how far and how fast," he says

However, he adds: "We live in an uncertain world, and the road ahead will have bumps on it."

For context, markets are now expecting three more cuts in interest rates this year.

The Bank of England's press conference is now starting - you can follow along by clicking 'Watch live' at the top of the page.