Dearbail Jordan
Reporting from the Bank of England

Let’s now take a closer look at the Bank’s forecasts for the UK economy.

The UK will only narrowly avoid a recession, according to the forecasts, after the Bank downgraded its economic outlook in a blow for the government.

It has predicted that the economy shrank between October and December - first estimates will be coming out next week - and will grow only marginally in the first three months of this year.

Inflation is also expected to “rise quite sharply” later this year due to higher water bills, bus fares and energy costs and take longer to fall back to the Bank’s 2% target.

The government has made growing the economy one of its key policies, and last week Chancellor Rachel Reeves announced a number of potential projects and changes to planning rules to boost the UK’s performance.

However, the bank expects the economy will remain sluggish for some time.

Kevin Peachey
Cost of living correspondent

More on that bleaker forecast from the Bank of England on how much the UK economy will grow.

It expects the sluggish growth that we've seen for some time to last for longer that it previously predicted.

Add to that the expectation of prices rising at a faster rate - known as inflation - owing to the potential of rising gas prices.

That's an unhappy mix for the chancellor to consider ahead of some big decisions on spending.

It is also likely to dominate the debate about the UK economy, as the Bank governor says they will take a "gradual and careful" approach to cutting interest rates further.

Image source, Reuters

Chancellor Rachel Reeves has welcomed the decision to cut interest rates to 4.5%, but says she is still "not satisfied" with the growth rate of the UK economy.

She says the interest rate cut will "help to ease the cost of living pressures felt by families across the country and making it easier for businesses to borrow or grow".

"However, I am still not satisfied with the growth rate. Our promise in our Plan for Change is to go further and faster to kickstart economic growth to put more money in working people's pockets," she says.

"That's why we are taking on the blockers to get Britain building again, ripping up unnecessary regulatory barriers and investing in our country to rebuild roads, rail and vital infrastructure."

A far from happy set of figures for the UK chancellorpublished at 12:13 Greenwich Mean Time

12:13 GMT

Faisal Islam
Economics editor

Another cut in interest rates, and the surprise here was that more consideration was given to a bumper half a percentage point cut in rates today, as the UK’s economic stagnation is forecast to extend into the first part of this year.

If everything was equal, the assumption would be that the weak economy would now lead to further gradual cuts this year, bringing interest rates down to 4% or lower by the end of the year.

But the stagnant economy is now accompanied by sharper inflationary risks from higher energy prices.

Inflation is expected to “rise quite sharply” into the Autumn, getting close to 4%, driven by rises in gas prices arising from the need to fill drained storage facilities after a cold winter. While a recession is forecast to be narrowly avoided, zero growth and high and rising inflation is textbook “stagflation”.

On top of all that the Bank is stressing that it will be “careful” with cuts against the backdrop of tremendous uncertainty about US President Donald Trump’s trade policy.

The uncertainty is not just about what he does, but the market reaction to it, and the response of other countries, including the UK. Today’s weaker forecast did not factor in the US tariff policies.

It is a far from happy set of figures for the chancellor. The economy has been flat since March. A technical recession is narrowly avoided, but there is a risk of little or no growth well in to this year.

Over this year the economy is forecast to grow by just 0.75%, half the rate forecast in November. Unemployment is expected to rise over the next two years to just below 5%. The Bank’s contacts with business report that more firms “mentioned the Budget as a deterrent to investment” referencing business asset relief, inheritance tax and National Insurance.

The Bank has also done its stock take of the long run health of the economy, concluding that sickness, the pandemic, and Brexit all hit the productivity of the economy.

All in all, a challenging domestic vista, with global uncertainties rising.

The Bank of England says it expects the UK economy to grow by 0.75% in 2025, down from a previous forecast of 1.5%.

Kevin Peachey
Cost of living correspondent

It is interesting to note the differences of opinion among the nine-member committee making the decision on rates (made up of five women and four men).

While seven voted for a cut from 4.75% to 4.5%, two wanted a bigger cut to 4.25%.

That highlights some of the uncertainty for the UK economy, as well as the differing outlook among members, despite the consensus on the decision to make some kind of interest rate cut today.

The Bank of England has cut interest rates to 4.5% from 4.75%.

The decision could lead to cheaper borrowing costs for things like mortgages and loans, but also lower returns on savings.

Today’s decision means rates are now at their lowest point since June 2023.

Kevin Peachey
Cost of living correspondent

As the old joke goes: put 10 economists in a room and you’ll get 11 opinions.

I know, it’s a belter!

That said, there’s a shared opinion among many economists that interest rates will be cut today. In fact, it’ll be a shock if they aren’t.

But there’s a more lively debate over whether this is the first of a few, or many, cuts this year.

Some market-watchers are expecting a couple more cuts, some more than that. Expect to hear plenty more on that subject in the coming hours, weeks and months.

Tommy Lumby
BBC business data journalist

Interest rates are at 4.75%, after the Bank of England’s (BoE’s) rate-setting committee held it at that level at its last meeting shortly before Christmas.

The figure is important because it strongly influences how much banks charge people to borrow money, or pay on their savings.

Markets are confidently predicting a cut at today’s meeting, to 4.5%, which would be the lowest figure since June 2023.

That would potentially be one of several shavings to come this year, according to economists’ expectations.

But US President Donald Trump’s threats to slap trade tariffs on imports from various nations could raise the price of goods and services.

That in turn could lead the BoE and other central banks to reconsider the extent of rate cuts.

Image source, Getty Images

Interest rates can impact people in different ways - and it all depends on your circumstances.

Mortgage holders with variable or tracker mortgages, or who are looking to secure new fixed-rate deals, will face either higher or lower monthly repayments, depending on whether the UK’s main interest rate is raised or cut.

If rates are higher, it becomes harder generally for first-time buyers, as it becomes more expensive to borrow and they may find themselves priced out of the market, and vice versa.

Charges for unsecured loans and credit cardsmay be affected, andpeople with savings would be hit by lower interest rates as they would get worse returns on their money.

Higher rates have been good news for those on the cusp of retirement, as they have meant better annuity rates. This determines how much guaranteed income you get, when you swap some or all of your pension pot for a secure income. That's because providers typically buy government bonds, which can move in line with higher interest rates.

For the government though, higher interest rates in recent times have meant it has had to pay more interest on the country's debt. This has been in the spotlight following reaction on financial markets to Rachel Reeves’ Budget, which saw the amount the government has to pay lenders rise.

Kevin Peachey
Cost of living correspondent

A cut in interest rates would be good for borrowers, but bad for savers.

Many people are both, of course, but savings can sometimes be overlooked on a day like today.

Banks and building societies are likely to cut the rates on variable savings accounts, if there is a base rate cut.

The current average for an easy access account is about 3%.

Overall, the returns on savings have been relatively high, analysts say, but it is those who shop around or who lock-in those savings for a set period of time who’ve been getting the best deals.

The Bank moves rates up and down in order to control UK inflation - which is the increase in the price of something over time.

When inflation is high, the Bank may decide to raise rates to bring inflation back down towards its 2% target. The idea is to encourage people to spend less and reduce demand.

Once inflation is at or near the target, the Bank may hold rates, or cut them.

It has to balance the need to slow price rises against the risk of damaging the economy, and avoid cutting rates only to have to raise them again shortly afterwards.

While its remit is not to stimulate growth, the Bank is under pressure to help boost growth, which has been sluggish for some time.

Image source, PA Media

This is a busy day for Bank-watchers which will likely have an impact on us all.

We get the Monetary Policy Committee’s decision on interest rates at midday.

It will also publish its Monetary Policy Report - the first of four this year - which sets out the economic analysis and inflation projections it uses to come to its decision.

We will pore over this for hints of what may come next for the UK economy.

We will also hear directly from the Bank’s Governor, Andrew Bailey, when he talks to journalists, so we’ll be there to bring you the latest updates.

Kevin Peachey
Cost of living correspondent

Markets and mortgage lenders have "priced-in" a rate cut today - in other words, it is already reflected in the interest rate charged by mortgage providers on new fixed rate deals.

Crucially, like us, they will be listening intently to the Bank's governor, and reading the Bank's reports, for any signs of future interest rate cuts.

Any hint of lots of base rate reductions this year could lead markets and lenders to start to move.

That could see them cut mortgage rates, bringing some cheer to anyone renewing their deal in the not-too-distant future.

Of course, such hints might not come. We'll just have to wait and see.

Image source, Getty Images

We’ll bring you the Bank of England’s decision on interest rates at midday today.

The Bank’s rate, which dictates borrowing costs for households and businesses - such as mortgages and loans - is currently 4.75%.

Economists think it highly likely the Bank will cut the base rate to 4.5%, although we won’t know for certain until later.

After the decision we’ll also get the Bank’s report on inflation and where interest rates could go from here.

Stay with us as our experts explain what it all means for your money and the wider economy.

Dearbail Jordan
Business reporter at the Bank of England

Good morning from London’s very chilly Threadneedle Street where BBC apprentice Lucy Acheson and myself are now locked in the Bank of England's basement.

We’re covering the interest rate decision – and it’s a big one this time.

That’s because the Bank will also publish what it calls the Monetary Policy Report and everyone else just calls the inflation report, which sets out its forecasts for the UK economy.

It’s a big old brick of a thing which means we journalists are given two hours instead of the usual one to read, ruminate and distil it into a news story.

To do this, the Bank of England locks us in its basement, not because we’ve been naughty but because it has to make sure that nothing leaks before the interest rate decision is released to everyone at midday.

At that point, the Bank’s staff give us the wi-fi password, we send our news story to you before we’re herded upstairs to a press conference with governor Andrew Bailey.

It’s going to be action-packed – see you on the other side.