Base rate cut to 4.5% – what savers should do next

The Bank of England’s Monetary Policy Committee (MPC) has decreased the base rate to 4.5%, marking the first cut of 2025.

Lower-than-expected inflation figures for December paved the way for a reduction. Data from the Office for National Statistics showed that CPI inflation has eased to 2.5%, down from 2.6%. Analysts had expected this to either hold steady or increase to 2.7%.

A shift towards easing

At the December meeting, three members of the MPC voted in support of a rate cut to stimulate economic growth. Today’s decision reflects a growing consensus.

Seven members of the MPC, including Governor Andrew Bailey, voted to lower the base rate by 25 basis points. The remaining two members (Swati Dhingra and Catherine Mann) voted to reduce the base rate by 50 basis points – down to 4.25%.

Commenting on today’s outcome, Andrew Bailey said:

“It will be welcome news that we have been able to cut interest rates again today. We'll be monitoring the UK economy and global developments very closely, and taking a gradual and careful approach to reducing rates further.”

What does this mean for savers?

The drop in the base rate presents both opportunities and challenges. Historically, when the base rate falls, retail banks tend to reduce interest rates, particularly on Instant Access savings accounts. But there’s still a window of opportunity to lock in competitive rates before further cuts are expected this year.

Savers should consider taking advantage of the current favourable rates still available on long and shorter-term savings accounts. Whether you prefer the flexibility of Instant Access accounts or the higher returns of Fixed Term accounts, it’s not hard to find inflation-beating rates.

This is where platforms like Flagstone come in. We offer a simple, secure way to access hundreds of savings accounts across 60+ banks – all through one login. It’s never been easier to both protect your cash and maximise its possibilities.

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Frequently asked questions

What is inflation

The term ‘inflation’ refers to the increase in the price of goods and services in the UK. How quickly prices go up is called the inflation rate. When economists talk about inflation, they express it as a percentage change over a year. For example, if inflation in the UK is 2%, it means that, on average, prices are 2% higher than they were the same time last year.

Learn more: Understanding inflation, the base rate, and GDP

How does the base rate affect inflation?

When the Bank of England raises its base rate, borrowing – on things like mortgages and loans – becomes more expensive. At the same time, saving becomes more attractive, as banks and financial institutions typically offer better returns. This encourages people to save more and spend less.

With less spending, demand for goods and services falls, making it harder for businesses to raise prices. When prices rise at a slower pace, inflation starts to fall.

When is UK inflation data released?

The ONS releases inflation data each month, based on the previous month’s figures. Here are the release dates for 2025:

• 15 January
• 19 February
• 26 March
• 16 April
• 21 May
• 18 June
• 16 July
• 20 August
• 17 September
• 22 October
• 19 November
• 17 December

When is the next Bank of England base rate review?

The MPC meets every six weeks to review the base rate. Here are the dates for 2025:

• 6 February
• 20 March
• 8 May
• 19 June
• 7 August
• 18 September
• 6 November
• 18 December

Navigating interest rate changes

With the Bank of England adjusting the base rate, now’s the time to rethink where your cash is sitting – and how to make it grow.

Don’t let your money miss out on better returns. By using cash savings platforms like Flagstone, you can quickly compare a wide range of savings products from over 60 banks, ensuring your cash is reaching its full potential. Use our interest rate calculator to discover how much more your money could be earning.

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