Bank of England Defies Inflation Fears: Slashes Rates to 4.0% in Bold Move

The Bank of England just dropped a monetary bombshell—cutting rates to 4.0% while inflation still runs hot. Here's why traditional finance keeps playing checkers while crypto plays chess.

Rate Cuts vs. Reality: Threading the needle between recession fears and price surges, the BOE's move screams 'soft landing' gamble. Meanwhile, Bitcoin hodlers shrug—decentralized money doesn't wait for central bank permission slips.

Inflation Irony: With CPI still climbing, this rate cut feels like handing out umbrellas during a hurricane. Traders are already front-running the next pivot—because nothing fuels asset bubbles like cheap money chasing scarce Bitcoin.

One thing's certain: while bankers debate percentages, Satoshi's creation keeps doing its 10-minute settlement dance. The harder they try to 'manage' economies, the brighter crypto's value proposition shines.

United Kingdom economic outlook: why it matters

The Bank of England left the benchmark interest rate unchanged when it met in June. However, three MPC members cited “material further loosening in the labour market,” subdued consumer demand, and pay deals NEAR sustainable rates as a reason to trim rates.

Since then, macroeconomic data has been quite worrisome. The Gross Domestic Product (GDP) contracted 0.1% MoM in May, following a 0.3% decline in April, according to the Office for National Statistics (ONS). The report also showed that:

“Of the three main sectors in May 2025, production output was the largest contributor to the monthly GDP fall, decreasing by 0.9%. Construction output also decreased by 0.6%. These figures were partially offset by an increase of 0.1% in services output in May 2025.”

It is worth reminding ourselves that the first estimate of the second quarter GDP will be released on August 14.

Meanwhile, inflation in the United Kingdom (UK) has risen to its highest level in over a year in June. The Consumer Price Index (CPI) was up 3.6% on a yearly basis, after posting 3.4% YoY in May. Meanwhile, the Core annual CPI printed at 3.7%, up from the 3.5% posted in May. The ONS indicated that food prices rose in June by the most since February 2024, while also indicating that services inflation remains at 4.7%.

Finally, employment-related data has been less worrisome as the labor market keeps loosening. The Unemployment Rate stood at 4.7% in April, increasing from the 4.4% posted at the beginning of the year.

BoE officials will have to assess whether slowing growth or rising inflationary pressures weigh more. Nevertheless, Governor Andrew Bailey said, “I really do believe the path is downward” on interest rates in an interview with the Times.

Regarding economic projections, policymakers may upwardly review inflation perspectives and downwardly review growth-related ones.

How will the BoE interest rate decision impact GBP/USD?

The MPC has no easy task, and voting will likely be split. Generally speaking, market players anticipate an interest rate cut, which will be no surprise. The split vote among MPC members could shake the Sterling Pound, alongside discouraging revisions to growth and inflation. Market players will also pay close attention to Bailey’s words. The more hawkish despite the dismal macro picture, the less likely the GBP is to fall.

Ahead of the announcement, the GBP/USD pair trades within a tight range just above the 1.3300 mark, pressuring the upper end of the range with a modest upward bias. Still, the expected BoE announcement seems more of a downward risk for the pair.

, FXStreet Chief Analyst, notes:

“The GBP/USD pair hover around its weekly peak in the 1.3330 region, without any technical sign of additional gains ahead. The daily chart shows a flat 100 Simple Moving Average (SMA) provides resistance at around 1.3350, while the 20 SMA maintains its bearish slope at around 1.3400. The pair could turn bullish once beyond the latter, an unlikely scenario with the BoE’s expected announcement.”

She adds:

“On the downside, the 1.3250 area is the one to watch, as once below it GBP/USD may turn bearish. Interim support comes at 1.3200 ahead of the August monthly low at 1.3141.”