‘We’ve passed the recent peak in inflation’ – Bank of England boss
Borrowers today welcomed the Bank of England’s move to cut interest rates to 3.75%.
The bank’s Monetary Policy Committee (MPC) voted five-to-four today to reduce the base interest rate by 0.25 – the sixth cut since August 2024.
Governor Andrew Bailey joined four others in favour of the reduction, while four members preferred to hold at 4%, citing the risk of persistent inflationary pressure.
Bailey said: “We’ve passed the recent peak in inflation and it has continued to fall, so we have cut interest rates for the sixth time, to 3.75% today.
“We still think rates are on a gradual path downward. But with every cut we make, how much further we go becomes a closer call.”
The decision reflects easing inflation pressures, with CPI (consumer price index) inflation falling to 3.2% in November, driven by subdued economic growth and a worsening labour market with fewer jobs being chased by more jobseekers.
Unemployment rose to 5.1% in the three months to the end of October, according to the Office for National Statistics (ONS)’s Labour Force Survey, published this week, and GDP growth slowed to 0.1% in Q3, with Q4 expected to be flat.
Inflation is projected to decline towards 2% in early 2026, aided by Autumn Budget measures lowering energy and fuel costs.
However, wage growth and services inflation remain elevated, making future cuts a finely balanced issue, said the MPC, which signalled a gradual approach to easing, contingent on sustained downward movement in inflation.
