Bank of England cuts rate to 3.75%

December 18, 2025 (MLN):   The Bank of England cut its benchmark interest rate to 3.75% on Thursday after a closely split vote, marks its final monetary policy decision of 2025 as policymakers weighed easing inflation against a weakening economy.

The central bank’s nine-member Monetary Policy Committee voted 5–4 to lower the rate by 25 basis points, the fourth reduction this year, CNBC reported

 The move had been widely expected, coming amid lackluster economic growth, a softening labor market and a sharper-than-anticipated decline in inflation.

The decision nevertheless exposed divisions within the committee.

Governor Andrew Bailey sided with more dovish policymakers, while four members opposed the cut, arguing inflation  which stood at 3.2% in November  remains well above the Bank’s 2% target.

Lower borrowing costs are expected to offer some relief to households and businesses, though savers are likely to see reduced returns.

Allan Monks, chief UK economist at JPMorgan, said additional rate cuts beyond December appear likely, with the bank’s base case calling for reductions in March and June that would bring the rate down to 3.25%, according to CNBC.

However, he warned that elevated wage expectations for next year are keeping policymakers cautious.

Any sign of moderation in pay growth could prompt the Bank to move faster, potentially paving the way for another cut as early as February.

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