The Bank of England lowered its key interest rate at its policy-setting meeting earlier Thursday, as widely expected, with policymakers swayed by a sharp slowdown in inflation and a weakening in economic growth.
The U.K. central bank cut its Bank Rate to 3.75%, a reduction of 25 basis points from 4%, taking this benchmark rate to its lowest level in nearly three years.
This is the fourth such reduction this year, with the central bank having last cut interest rates in August.
Five members of the nine-strong Monetary Policy Committee voted for interest rates to fall, with four policymakers pushing for an unchanged rate - a shift from the 5-4 stance to hold at the last meeting.
Stay ahead of central bank decisions and key economic data on InvestingPro - get 55% off today The decision to ease monetary policy followed a hefty reduction in Britain’s inflation rate earlier this week, with the November reading of the consumer price index dropping to 3.2%, from 3.6% the prior month.
This was its lowest level since March, but it still remains the highest among the Group of Seven major advanced economies and substantially above the BoE’s 2.0% target.
Economic data elsewhere made less pleasant reading, as data on Tuesday showed a weakening jobs market including the highest unemployment rate since 2021, and Britain’s economy actually shrank 0.1% in the three months to October amid reports that businesses put investment projects on ice in the run-up to the Autumn budget near the end of November.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. Investors are fully pricing only one more BoE rate cut in 2026, most likely by the end of April, although bets on a second one rose after the November inflation drop.
“We look for further rate cuts in February and April, whereas market pricing only sees one cut during that period,” said analysts at ING, in a note.
