- MPC Official Bank Rate: 3.75% (forecast: 3.75%; prior: 4.0%)
- Votes for cut: 5(forecast: 5; prior: 4)
- Votes for no change: 4 (forecast: 4; prior 5)
The Bank of England delivered a slightly “hawkish” rate cut today, lowering Bank Rate by 25 basis points to 3.75% in a finely balanced 5–4 vote. The move marks the lowest level of rates since early 2023. The Bank returned to the cuts after 3 meeting where the rate was kept at 4%.
The headlines show a Monetary Policy Committee is deeply divided but gradually converging on the view that disinflation is sufficiently established to justify more support for the economy. Upside risks to inflation are judged to have diminished, CPI is now seen moving “closer” to the 2% target in Q2 2026, and staff have revised down their near‑term CPI projections. Several members highlighted that CPI risks are increasingly tilted to the downside, with some explicitly backing scope to slow the cadence of future easing rather than halt it altogether.
Governor Bailey framed the decision as a close call and signalled that the room for further cuts is becoming more limited as rates approach their neutral level, but he also endorsed the view that policy is likely to remain on a “gradual downward path.” The message is that the bar for additional cuts is higher, not that the door is shut. In practice, the Bank has shifted into a more data‑dependent mode: if incoming data confirm weaker growth, softer wage dynamics and contained services inflation, the MPC is prepared to ease again, albeit cautiously. It seems that the major catalyst that allowed for the cut was significant decrease in CPI for November to 3.2% from 3.6%, coming in lower than oth market forecasts and Bank’s own projections.
The market is signalling that the next cut may occur April and probably it would be the last one in the cycle. Altough, the Bank decided to cut interest rates today, Bailey’s words seem to be a litlle bit hawkish which is supportive for the pound. GBPUSD reversed earlier decrease and now is traded near yesterday close at 1.3380.
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