The cut brings the U.K.’s key rate down to its lowest in nearly three years, and will immediately benefit businesses whose borrowing costs are largely floating.Tolga Akmen/EPA

Bank of England cuts rates again as UK economy falters – POLITICO

18 Dec 2025, 12:07 by Geoffrey Smith · POLITICO

The Bank of England cut its key interest rate by a quarter-point to 3.75 percent, saying that the U.K. economy had cooled enough to justify loosening financial conditions.

But after cutting rates in every quarter this year, it signalled that it is likely to slow the pace of easing in 2026, amid fears that inflation is still too far above target and that wage growth is set to remain stubbornly high, despite rising unemployment.

“We think that Bank Rate is likely to fall gradually further in future, but that will depend on whether variables like pay growth and services inflation continue to ease,” Governor Andrew Bailey said in a statement accompanying the Monetary Policy Committee’s decisions.