Scottish Friendly savings expert Kevin Brown comments on this afternoon’s MPC decision

MPC didn’t disappoint

The Monetary Policy Committee didn’t disappoint, cutting rates to 4% as expected. The move came in spite of inflation hitting 3.6% in June, significantly ahead of the Committee’s target of 2%.

The cut suggests policymakers believe that a slowing labour market and lacklustre economic growth will combine to bring inflation under control over the next few months. The Committee has previously said it would be willing to cut rates if the job market showed signs of weakening. Employment data earlier in July showed signs of rising unemployment and slowing wage growth.

There remain concerns over the persistency of price rises, particularly in areas such as food, energy and labour costs. Nevertheless, prices are expected to drop in the latter half of 2025 and into 2026.

The interest rate cut had been widely anticipated and is therefore likely to be reflected in government bond markets already. Mortgage rates had already been coming down and are unlikely to move significantly lower as a result. However, the cut may have an impact on savings rates and should be a catalyst for savers to shop around for the best rates to ensure their cash holdings are outpacing inflation.