Bank of England cuts interest rates to 3.75pc as inflation falls to 3.2pc

London: The Bank of England has cut its benchmark interest rate to 3.75 per cent, providing a pre-Christmas boost to the still-struggling UK economy, according to updates from The Guardian.

The Bank’s nine-member Monetary Policy Committee (MPC) voted 5–4 in favour of reducing the rate from 4 per cent, highlighting divisions within the committee over how quickly to ease monetary policy. While inflation remains above the Bank’s 2 per cent target, policymakers also acknowledged the need to support weakening economic activity.

According to Reuters, the Bank cautioned that the decision does not signal an aggressive cycle of rate cuts. Instead, future moves will remain data-dependent, with officials seeking sustained progress on inflation and broader economic conditions before considering further easing.

One of the more hawkish members of the MPC, Chief Economist Clare Lombardelli, warned that persistently strong wage growth could slow the pace of future rate reductions. The Bank’s regional agents reported that employers expect pay growth to average around 3.5 per cent in 2026, a level that could continue to fuel underlying inflationary pressures.

The rate cut is likely to be welcomed by Chancellor Rachel Reeves, who used her November budget to introduce a package of inflation-fighting measures aimed, in part, at giving the Bank greater scope to begin lowering borrowing costs.