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18h ago

Bank of England Cuts Interest Rate to 3.75% After Inflation Cools

The narrow 5-4 vote after a bigger-than-expected drop in inflation signals cautious easing with a path back toward 2% projected in 2026.

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A man walks past the Bank of Japan headquarters in Tokyo, Japan, December 18, 2025. REUTERS/Kim Kyung-Hoon
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Overview

  • The Monetary Policy Committee lowered Bank Rate by 0.25 percentage points to its lowest level since early 2023, the fourth cut of 2025 and sixth since August 2024.
  • Governor Andrew Bailey switched his position to form the 5-4 majority, while four members argued to hold over concerns about persistent services inflation and wage growth.
  • ONS data showed CPI slowed to 3.2% in November, and the Bank now projects inflation will fall close to the 2% target by around the second quarter of 2026.
  • Officials said Budget measures such as energy bill support and frozen duties are likely to trim CPI by about 0.5 percentage points next year, bringing forward disinflation.
  • The Bank warned growth remains weak, expecting GDP to flatline in Q4, while the cut should reduce costs for variable-rate borrowers and has prompted lenders to lower some fixed-rate deals.