The Bank of England cut the bank rate by 25 basis points to 4.25%, as expected, but reiterated that future rate reductions would be gradual. The vote was a three-way split, with some policymakers favoring a bigger rate cut and others favoring no change. This reflects the current high uncertainty over how U.S. tariffs will impact growth and inflation. Sterling and gilt yields rise after the decision. The following is a selection of analyst comments.

Likelihood of BOE Rate Cut in June Fades

1416 GMT - The chances of a follow-up Bank of England interest-rate cut in June are fading after Thursday's decision, says Aviva Investors' Steve Ryder in a note. The BOE reduced rates but reiterated that further cuts would be gradual. Aviva Investors expects quarterly interest-rate cuts into the summer before more evidence of slowing inflation and activity opens the potential for sequential cuts, the senior portfolio manager says. "Today's statement has reduced the chance of a consecutive cut in June," he says. Aviva continues to see risks of weaker U.K. activity data which would mean U.K. interest rates eventually end up lower than markets currently price, Ryder says. (emese.bartha@wsj.com)

BOE Decision Unlikely to Lift Sterling Much Further

1403 GMT - Sterling is unlikely to rise much further even after the Bank of England's meeting Thursday prompted markets to scale back bets for another interest-rate cut in June, TD Securities analysts say in a note. "Our positioning and short-term fair value models point to sterling looking expensive," they say. That should keep sterling rangebound against the dollar absent another dollar selloff, they say. Short-seller bets against the dollar looked stretched, suggesting the U.S. currency could rebound. Against the euro, sterling could also underperform due to structural flows into Europe, with the euro emerging as the liquid alternative safe haven to the dollar, TD's analysts say. Sterling rises 0.3% to $1.3337. The euro falls 0.3% to 0.8477 pounds.(renae.dyer@wsj.com)

BOE's Vote Split Reveals Increased Caution

1353 GMT - The Bank of England cut interest rates on Thursday but its divided vote suggests policymakers could be more cautious than they were at the time of the last rate cut in February, Capital Economics' Ruth Gregory says in a note. The central bank cut its key rate to 4.25% from 4.5%. As in February, two of the nine members voted to reduce rates by a bigger 50 basis points but this time two also voted for unchanged rates. The BOE will likely pursue more rate cuts, though perhaps not as fast as markets expect, Gregory says. It reiterated that rate cuts will be "gradual and careful," suggesting that policymakers aren't ready to conclude that near-term inflation risks have disappeared, she says.(edward.frankl@wsj.com)

BOE's Divided Vote Highlights Policy Dilemma Amid Tariff Uncertainty

1258 GMT - The three-way vote split in the Bank of England's interest-rate decision highlights the challenge monetary policymakers face deciding the policy rate due to uncertainty around the effects of tariffs on the economy, Quintet Private Bank's Daniele Antonucci says in a note. Five MPC members voted in favor of a 25 basis-point rate cuts, two members voted for a biger 50bps rate cut, while two voted to keep rates unchanged. "The tariffs might eventually be disinflationary by weakening the pace of economic growth, but in the near term they might also raise inflation, with a risk that this feeds into inflation expectations," Antonucci says. "The situation remains very fluid." (miriam.mukuru@wsj.com)

Sterling Could Rise Further on Prospect of Closer U.K.-EU Ties After BOE Decision

1254 GMT - The Bank of England's more cautious than expected tone on interest rate cuts Thursday should help sterling to benefit from the prospect of closer U.K.-EU ties, ING analysts say in a note. The BOE cut rates by 25 basis points but maintained its guidance for gradual future cuts. The BOE's indication that it's not ready to accelerate rate cuts, as some had expected, lifted sterling. Sterling could rise further if the U.K-EU summit on May 19 lead to improved relations, the analysts say. Warmer relations could prompt the Office for Budget Responsibility to raise U.K. growth forecasts, providing more U.K. fiscal headroom. The euro falls 0.3% to 0.8477 pounds and ING expects it to fall to 0.8400 this month.(renae.dyer@wsj.com)

Bank of England Looks Reluctant to Cut Rates Faster

1238 GMT - A divided Bank of England is now dragging its feet on easing monetary policy, Deutsche Bank economist Sanjay Raja says. The BOE's monetary-policy committee voted Thursday to lower its key rate by a quarter-point, but the vote was tied, with two of the nine members in favour of a deeper half-point and two voting to hold rates. "While the direction of policy is still down, the MPC continues to drag its feet on both the speed and scale," Raja says. That makes successive cuts unlikely, at least until the end of the year, he says. (joshua.kirby@wsj.com; @joshualeokirby)

Sterling Could Remain Supported if BOE Stays Cautious on Rate Cuts

1230 GMT - Sterling should remain supported if the Bank of England follows through on its plans for gradual future interest-rate cuts, Ebury strategist Matthew Ryan says in a note. A pause in rate cuts is "almost guaranteed" at the BOE's next meeting in June with no more than two further cuts likely to follow for the rest of this year, he says. This cautious approach should "act to keep sterling well bid, particularly given Britain's relative isolation from the growth risks posed by U.S. protectionism." The BOE voted 5-2 to cut rates by 25 basis points Thursday but reiterated its "gradual and cautious" approach to future policy easing. Sterling rises 0.3% to $1.3327. The euro falls 0.3% to 0.8477 pounds. (renae.dyer@wsj.com)

Bank of England Remains Worried About Inflation

1224 GMT - The Bank of England looks unwilling to declare the war against inflation won, BCA Research's Mathieu Savary says. The bank's rate setters voted to lower interest rates Thursday but only by a quarter point, and noted continued inflationary pressures in the U.K. economy. "The monetary-policy committee is signalling it needs clear proof of softer growth and cooling wage gains before cutting again," Savary says. That proof should come in the second half of the year as demand and jobs weaken, spurring fresh cuts to the bank rate, he says. (joshua.kirby@wsj.com; @joshualeokirby)

Markets Price In Fewer BOE Rate Cuts After Rate Announcement

1218 GMT - Markets lower expectations of interest-rate cuts from the Bank of England in the coming months after the central bank cut rates on Thursday but reiterated that future reductions would be gradual. Money markets show investors currently price in a 19% chance of a BOE rate cut in June, down from a 52% chance priced in beforehand, according to LSEG data. For the whole of 2025, investors now price in just two further rate reductions, having recently priced in three more cuts after this month, the data show. (miriam.mukuru@wsj.com)

Bank of England Signals Gradual Rate Cuts

1211 GMT - The Bank of England looks likely to follow a gradual path of rate cuts despite gathering trade uncertainty, Christoph Balz at Commerzbank writes in a note to clients. The bank's policy committee lower its key rate by 25 basis points Thursday, and noted the threats to growth ahead from tariffs and associated uncertainty. The BOE meanwhile maintained its forward guidance on policy, promising a "gradual and careful approach" to lifting policy restraint on the U.K.'s economic activity. That suggests the bank will continue to cuts rates once a quarter, rather than every meeting, and at gradients of quarter-points rather than anything more drastic, Balz says. (joshua.kirby@wsj.com; @joshualeokirby)

BOE Could Cut Rates Again Next Month as Inflation Slows

1209 GMT - The Bank of England could cut interest rates again next month after lowering its key rate by 25 basis points to 4.25% on Thursday, HSBC Asset Management's Hussain Mehdi says in a note. "With inflation data heading in the right direction, the Monetary Policy Committee now looks more comfortable with rate cuts that we believe are needed to buoy growth and potentially ease pressure on government financing costs." The BOE could cut rates by a total of 125 basis points this year, he says. If service sector inflation and wage growth ease further, rate cuts could be front loaded with another cut as soon as next month. (renae.dyer@wsj.com)

U.K. Might Not Face Much of a Blow From Trump Tariffs

1204 GMT - Trade tariffs might prove less of a drag on the U.K. economy than investors have thought, ING's James Smith and Chris Turner write in a note. The Bank of England moved Thursday to lower its key interest rate, but only by a quarter-point, and the policy committee didn't change its language in a way that suggests they expect a major blow from tariffs. BOE Governor Andrew Bailey meanwhile welcomed news of a trade deal with the U.S., which could soften any tariff blow further. "While the added uncertainty and weaker outlook for global growth will become a headwind, the reality is that the direct impact of U.S. tariffs so far looks very limited," Smith and Turner say. That suggests the central bank will cut rates only gradually over the remainder of the year, they say. (joshua.kirby@wsj.com; @joshualeokirby)

BOE's Growth Concerns Leave Door Open to June Rate Cut

1202 GMT - The Bank of England's mixed vote split in favor of relaxing monetary policy suggests that concerns over the U.K.'s economic resilience remain prevalent, which leaves the door ajar for a June rate cut, the Institute of Chartered Accountants' Suren Thiru says. This is despite the bank forecasting slightly stronger growth, he says. "With inflation expected to be slightly more subdued and concerns over turbulence in the global economy likely to persist, even with a U.S.-U.K. deal on trade, the case for accelerating the pace of interest rate cuts may still increase." Thiru adds that Thursday's rate cut won't reverse the financial squeeze among households and firms, given other costs are still rising and global headwinds are still elevated. (edward.frankl@wsj.com)

Bank of England Has a Tightrope to Walk

1152 GMT - The Bank of England has an unenviable task ahead, Morningstar's Michael Field tells investors. The central bank on Thursday decided to lower its key interest rate by a further 0.25 points to 4.25% amid the economic turmoil caused by U.S. trade tariffs. The U.K. is less exposed than European peers like Germany to tariffs on its goods but is still vulnerable to risks of both weaker growth and higher inflation, Field says. "The inevitable rise in inflation that would come with an escalation of the global trade war could make the Bank's task tricky," he says. (joshua.kirby@wsj.com; @joshualeokirby)

Sterling's Gains After BOE Decision Are Unlikely to Last

1151 GMT - Sterling's gains after the Bank of England said rate cuts in future would be gradual are unlikely to last, Ballinger Group forex analyst Kyle Chapman says in a note. Central banks have little influence on the market due to the current focus on tariffs, he says. "Reasonable forward guidance is an impossibility with such high levels of uncertainty" and traders are "chasing tariff headlines rather than watching rate spreads." The BOE voted 5-4 to cut rates by 25 basis points, with two preferring a bigger 50 basis-point reduction and two favoring unchanged rates. Some analysts had expected the BOE could drop its guidance for "gradual" rate cuts ahead. Sterling rises 0.2% to $1.3313. The euro falls 0.3% to 0.8481 pounds. (renae.dyer@wsj.com)

BOE's Three-Way Voting Split Shows Clear Division

1142 GMT - A three-way voting split at Thursday's monetary policy decisions shows the Bank of England's Monetary Policy Committee is clearly very divided on how policy should respond to the many shocks currently hitting the economy, says Aberdeen's Luke Bartholomew in a note. "This is highly unusual and will make it hard for the Bank to send a clear signal to the market about the likely path of policy," the deputy chief economist says. Still, with the BOE maintaining its guidance that further cuts will be "gradual and careful," the chance of another cut in June has probably fallen significantly. Aberdeen expects at least two more BOE rate cuts this year. (emese.bartha@wsj.com)

Gilt Yields Rise As BOE Cuts Interest Rates But Favors Gradual Easing

1136 GMT - Yields on U.K. government bonds rise after the Bank of England cuts interest rates by 25 basis points to 4.25% but reiterated that it favors a gradual pace of rate cuts in the coming months. The BOE is likely to maintain quarterly interest rate cuts "at least until the shocks filter through into the hard data," Ballinger Group's Kyle Chapman says in a note. The 10-year gilt yields climb to 4.506% following the BOE rate announcement from 4.440% beforehand, Tradeweb data show. Two-year gilt yields rise to 3.880%, from 3.784% beforehand. (miriam.mukuru@wsj.com)

Bank of England Looks Focused on Threats to Growth

1129 GMT - The Bank of England appears to be prioritising its efforts to mitigate the factors weighing on U.K. growth, MHA economic adviser Joe Nellis says after the central bank voted to cut the bank rate by a quarter-point Thursday. Nellis points to the threat from President Trump's tariffs and related trade uncertainty, despite annual price inflation still trending above the BOE's 2% target. "The Bank have recognised that rising inflation--driven largely by regulated price increases--is a short-term issue." Stagnating growth is by contrast not a short-term issue, Nellis says. "A weak economic outlook, compounded by uncertainty surrounding global trade, is a long-term problem that requires intervention," he writes in a note to clients.(joshua.kirby@wsj.com; @joshualeokirby)

Sterling Rises After BOE Repeats Guidance For Gradual Rate Cuts

1120 GMT - Sterling rises after the Bank of England delivered a widely-expected 25 basis points interest-rate cut but maintained its guidance for gradual policy easing. The BOE voted 5-4 to cut rates to 4.25%. Two members preferred to cut rates by 50bp while two favored leaving rates unchanged. The BOE reiterated that a "gradual and careful approach" to further rate cuts remains appropriate. Many analysts had expected an 8-1 vote for a 25bp cut with one backing a 50bp move. There was also speculation the BOE could drop its reference to gradual cuts. Sterling rises to $1.3325 after the decision from $1.3251 beforehand. The euro falls to 0.8479 pounds from 0.8514. (renae.dyer@wsj.com)

(END) Dow Jones Newswires

May 08, 2025 10:53 ET (14:53 GMT)

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