- The Bank of England cut its key interest rate by 0.25 percentage points for the first time in four months, from 4% to 3.75%, the lowest level since February 2023, in a narrow 5-4 vote.
- The Monetary Policy Committee remains divided after four members opposed the cut due to concerns that inflation may remain too high. The decision followed a sharp slowdown in UK inflation, which fell to 3.2% in November from 3.6% in October, below the central banks’ forecast of 3.4%.
- The UK jobs market is weakening, with unemployment rising to 5.1%, the highest since January 2021, slowing private sector pay growth, and declining job vacancies.
- The Bank forecasts near-zero growth in Q4 2025, down from a prior forecast of 0.3%, reflecting stagnation and delayed investment decisions ahead of the budget. Underlying growth is expected at about 0.2% per quarter.
- The Bank signaled a gradual path for rate cuts, suggesting future reductions will be cautious and contingent on incoming data. The possibility of halting further cuts is higher if inflation risks persist.
Bank of England Cuts Interest Rates by 0.25% in Narrow Vote
