Bank of England Cuts Interest Rate to 3.75% After Narrow Vote

The Bank of England has reduced its key interest rate to 3.75 per cent following a closely split vote, citing easing inflation and a weakening economic outlook.

London — The Bank of England cut the UK’s benchmark interest rate by 25 basis points to 3.75 per cent on Thursday, marking the fourth reduction this year as policymakers responded to slowing inflation and subdued economic growth.

The decision was narrowly approved by the Monetary Policy Committee, reflecting divisions over how quickly borrowing costs should be lowered while inflation remains above target. The rate cut brings borrowing costs to their lowest level in nearly three years.

Economic conditions drive decision

Policymakers said recent data pointed to softer price pressures and weaker momentum in the wider economy. Inflation has continued to ease from last year’s highs, while business activity and consumer demand have shown signs of stagnation heading into the final quarter of the year.

At the same time, officials warned that inflation remains elevated compared with the Bank’s long-term goal and that progress towards price stability is not guaranteed.

Cautious approach to further cuts

The central bank signalled that any additional rate reductions would depend on incoming data and the balance of risks. Officials stressed that future decisions would not follow a fixed path and would take into account developments in wages, services inflation and the labour market.

The split vote highlighted ongoing concern among some policymakers that easing policy too quickly could reignite inflationary pressures.

Impact on households and businesses

Lower interest rates are expected to ease borrowing costs for households with variable-rate mortgages and for businesses reliant on bank lending. However, savers are likely to see reduced returns on deposits as banks adjust rates in response to the decision.

Financial markets reacted cautiously, reflecting uncertainty over the pace of further monetary easing in 2026.

Source & Editorial Transparency:

This article is based on publicly available information, including reporting from multiple reputable news organisations and official sources.

It has been rewritten, contextualised, and editorially reviewed by the AI News UK Editorial Desk.