Asset managers have broadly welcomed today’s decision by the Bank of England to cut UK interest rates by 25 basis points to 4%.
Luke Bartholomew, Deputy Chief Economist, at Aberdeen said: “An interest rate cut today was almost universally expected, except it seems at the Bank of England itself where the voting patterns reveals a very close decision, which required a second round of voting before a majority could be found. The tight decision reflects the conflicting forces facing policymakers, with inflation proving stronger than expected but activity growth remaining weak. It will be difficult for the Bank to give clear guidance about the likely path of rates from here given the messy data and divided MPC. But in the end, we expect the weakness of growth to win out, and for the Bank to cut rates again later this year, and then through next year as well.”
George Brown, Senior Economist at Schroders, said: “Today’s rate cut is no surprise, but the path forward is anything but clear.
“Jobs, growth and inflation figures all call for different policy prescriptions, as reflected in the unprecedented two rounds of voting needed to reach a majority. Given the uncertainty presented by the conflicting data, the committee is right to stick to its “gradual and careful” mantra.
“Nervousness about the labour market might prompt another cut in November. But this will be difficult to justify unless disinflation is clearly underway. As such, we think there is a decent chance rates will not fall below the current rate of 4% this year.”
Michael Field, chief equity strategist at Morningstar, said: “The Bank of England’s decision to cut interest rates by 25 basis points was widely predicted by economists, but the decision was passed by the finest of margins, with 4 of the 9 members voting to leave rates unchanged at 4.25%.
“The bank has been carefully balancing the need to stimulate the UK economy with the desire to get inflation back to more normalised levels. Inflation in the UK currently sits at 3.6%, well above the BoE’s 2% targeted level, but this should decline naturally to some degree in the coming months.
“As such, the BoE is taking the prudent approach of small cuts to rates with pauses in between. Economists are predicting three more cuts over the next year. Such a level of cuts would bring interest rates more in-line with European levels. It would also go some way to stimulating the UK economy, and indeed equity markets, with sectors like homebuilders top of the list to benefit. ”
Zsolt Kohalmi, Global Head of Real Estate and Co-CEO of Pictet Alternative Advisors, said: “The Bank of England’s 25bps rate cut is a welcome step, especially as the UK plays catch-up with earlier, deeper cuts across Europe – while nominal rates here and in the US are still a hurdle for real estate. To attract international investors and spur a genuine revival in UK commercial property, more cuts will be needed to restore the positive leverage dynamics and sharper asset valuations that tend to drive capital back into the UK real estate market.”
Douglas Grant, Group CEO of Manx Financial Group, said: “While the Bank of England’s decision to cut interest rates to 4% offers some relief, the broader environment remains tough for UK SMEs. Ongoing cost-of-living pressures and geopolitical instability continue to erode business confidence.
“Recent research from Manx Financial Group shows that nearly a third of UK SMEs have had to pause or shut down parts of their operations due to a lack of finance over the past two years. Meanwhile, 38% expect no growth in the year ahead, up from 25% in 2024, highlighting the urgent need for a more stable and inclusive lending environment. Despite these headwinds, SMEs remain resilient and ambitious. With the right backing, they believe they could grow by up to 13% over the next year. This is a pivotal moment, not just to avoid stagnation, but to ignite broader economic renewal.
“To unlock this potential, we urge the government to adopt five urgent policy priorities. First, support exports and manage currency risk by widening access to international markets and providing financial tools to help SMEs navigate global volatility. Second, strengthen supply chains and digital scalability to boost resilience and unlock new trading opportunities. Third, reform credit access and incentivise investment in digital and green technologies, making it easier for SMEs to raise capital. Fourth, modernise tax and pension systems to foster innovation, attract capital, and reflect the needs of a modern, agile economy. Finally, launch a national digital skills accelerator to address workforce gaps in AI, tech, and green industries, key sectors for future growth.
“SMEs operate in a landscape reshaped by economic, political, and technological change. Business leaders must adapt their strategies to navigate risks and seize opportunities. Accessing affordable credit and leveraging monetary easing will be critical. With decisive action, the government can help unlock the full potential of Britain’s SMEs, and in doing so, bolster the UK’s long-term economic strength.”
