Bank of England cuts interest rates, in welcome Christmas boost for consumers
The Bank of England voted to cut interest rates from 4% to 3.75% in its last monetary policy move of 2025.
TL;DR
- The Bank of England voted 5-4 to cut its benchmark interest rate by 25 basis points to 3.75%.
- This marks the fourth interest rate cut of 2025, driven by weak economic data, a softening labor market, and lower-than-expected inflation.
- The Monetary Policy Committee stated inflation is expected to fall towards the 2% target more quickly, but future easing depends on the inflation outlook.
- The central bank anticipates the UK economy to record no growth in the fourth quarter of 2025.
- Economists predict further rate cuts in 2026, with some forecasting two more cuts in March and June, bringing the base rate down to 3.25%.
- Concerns remain regarding high wage expectations for 2026 and a stubborn jobless rate, which may lead to cautious messaging from the BOE regarding future easing.