Bank of England cuts rates by 25 basis points

The Bank of England cut interest rates by 25 basis points from 4.00% to 3.75%, as widely expected, but signaled that pace of lowering borrowing costs might slow further.

Data released on Wednesday signaled significant inflation drop in November that contributed to today’s decision, although with a tight vote (5-4) as policymakers are concerned about stagnating economy in the last quarter of 2025.

In the post-meeting statement, Governor Andrew Bailey (who voted for rate cut) said that rates remain in a gradual downward trajectory as the labor market is still relatively resilient but pointed to still elevated inflation expectations.

Economists expect more rate cuts next year, speculating that rates could move towards 3.25%/3.00% zone, as the economy expected to remain weak, while the recent budget is designed to push inflation lower, but highlighted that split MPC vote today suggests that committee would face difficulties in reaching consensus in the future decisions.