The Bank of England Suggests a More Cautious Approach to Further Interest Rate Cuts

On Thursday, December 18, the Bank of England announced a rate cut, with the Monetary Policy Committee (MPC) voting closely on the decision. The central bank also signaled that its current, already gradual pace of rate cuts could slow further. Data released this week showed a sharp drop in inflation. After Bank of England staff predicted economic growth would stagnate by the end of 2025, five MPC members voted to lower the UK’s benchmark rate from 4.0% to 3.75%—marking the fourth rate cut since 2025. The other four members opted to hold rates steady, citing concerns that UK inflation may still remain too high. Bank of England Governor Andrew Bailey shifted his stance to support the cut, reversing the committee’s prior voting dynamic. In a statement, Bailey said: “We still expect rates to be reduced gradually. However, it has become increasingly hard to gauge how much further we can cut after each reduction.” (Source: FXStreet)