BoE moves benchmark rate below 4% for first time since 2023: Key takeaways
Published on 18/12/2025 09:06 PM
The Bank of England (BoE) -- the British central bank -- on Thursday cut its key lending rate by 25 basis points (bps), in line with broad market expectations. The UK's benchmark interest rate now stands at 3.75 per cent -- below 4.0 per cent for the first time since early 2023.
The downward revision in the key rate comes amid cooling inflation and muted economic growth, and at a time when major central banks are looking to ease their monetary policies amid uncertainties related to the global trade landscape.
The BoE's Monetary Policy Committee -- the central bank's top decision-making panel -- voted 5:4 in favour of the rate cut/
With the latest rate cut, the sixth such revision since last summer, borrowing costs in the UK stand reduced to their lowest in nearly three years.
The rate cut comes as policymakers respond to easing inflation, rising joblessness and a sluggish economic outlook.
Unemployment in the economy worsened to 5.1 per cent -- the highest since early 2021 -- in the August-October period, from 4.3 per cent a year ago.
Earlier, official data showed that inflation in the UK economy eased to 3.2 per cent in November from 3.6 per cent in the previous month, owing to cooling food prices and amid Black Friday apparel discounts.
Weakness in the employment rate and cooling economic activity also impacted consumer prices.
The BoE projects no growth in the final three months of the year.
BoE chief Andrew Bailey stated that the disinflation process is becoming more firmly established, giving policymakers more room to ease the monetary policy.
He also said that with every cut, it becomes more difficult to take a call on the next downward revision.
The BoE, according to Bailey, expects inflation to be closer to its 2 per cent target by April next year, instead of 2027 as anticipated earlier.
The BoE governor also said that “conclusive evidence” is not there yet of a sharp deterioration in the jobs market and of inflation expectations not having shifted low enough.
With the expected rate cut now out of the way, economists are divided over additional reductions as policymakers struggle to prop up economic activities.
Some economists hold the view that more than monetary easing will be needed to aid economic growth.