The Bank of England has cut interest rates from 4.25% to 4% in a close 5 to 4 vote, the first time in its history that a second round of voting was needed to reach a decision. The move, its fifth cut in a year, brings rates to their lowest level since March 2023, as the UK faces weak growth, rising unemployment, and stubborn inflation. Inflation is now expected to peak at 4% in September, driven by rising food and labour costs. Governor Andrew Bailey said future cuts will be gradual and carefully considered. While the cut may lower mortgage costs for some borrowers, savings returns are likely to fall. Although the cut to 4% was expected, the narrow vote and second-round decision surprised markets, leading investors to scale back expectations for further easing. The pound rose 0.4% against the dollar, two-year gilt yields climbed to 3.87%, and the FTSE 100 fell as investors braced for a slower pace of cuts.