Credit: Kitco

The BoE by a majority vote of 7–2 to reduce its Bank Rate by 0.25 basis points, to 4.5%. At the same time, two members preferred to reduce Bank Rate by 0.5 percentage points, to 4.25%.

The BoE also suggested that interest rates have room to fall further this year.

"In support of returning inflation sustainably to the 2% target, the Committee judges that there has been sufficient progress on disinflation in domestic prices and wages to reduce Bank Rate to 4.5% at this meeting," the BoE said. "Based on the Committee’s evolving view of the medium-term outlook for inflation, a gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate."

The gold market has seen significant momentum against all major currencies as global uncertainty drives safe-haven demand. As of 7:30 am ET spot gold last traded at GBP2,315.8 up nearly 1% on the day.

The BoE also highlighted growing economic uncertainty as an other reason to maintain its easing bias.

"In addition to the risks around inflation persistence, there are also uncertainties around the trajectories of both demand and supply in the economy that could have implications for monetary policy. Should there be greater or longer-lasting weakness in demand relative to supply, this could push down on inflationary pressures, warranting a less restrictive path of Bank Rate," the BoE said.

Looking ahead, Michael Brown Senior Research Analysts at Pepperstone said that although the BoE is slightly more dovish than expected it doesn't change the trajectory of British interest rates.

"the base case remains that the current predictable pace of easing, with one 25bp cut being delivered per quarter, amounting to a total of 100bp of rate cuts being delivered this year, and Bank Rate ending 2025 at 3.75%. That said, risks to this base case do tilt towards a more dovish outcome, particularly if increased labour market slack acts as a significant drag on demand, in turn exerting downward pressure on stubborn services inflation. For now, though, the MPC seem likely to err on the side of caution," Brown said in a note.

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