Why did the Bank of England cut interest rates?

The Bank of England cut interest rates to 3.75% due to increasing evidence of a downturn in the jobs market and a projected economic stagnation.

What is the new Bank of England interest rate?

The new Bank of England interest rate is 3.75%, down from 4%.

When will mortgage rates go down in 2026?

While rates have already started to fall following the Bank of England's cut, experts are predicting further decreases and cheaper deals throughout 2026.

Home / Business and Economy / Bank of England Cuts Rates Amid Job Market Fears

Bank of England Cuts Rates Amid Job Market Fears

20 Dec

•

Summary

Interest rates lowered to 3.75% due to job market concerns.
Economy expected to stagnate with zero growth projection.
Inflation nears 2% target, signaling potential price stabilization.

Bank of England Cuts Rates Amid Job Market Fears

The Bank of England has implemented a significant interest rate cut, lowering the Bank Rate from 4% to 3.75%. This decision comes as policymakers observe increasing signs of a protracted downturn in the UK's job market and a projected economic stagnation. The central bank now forecasts zero growth for the last three months of the year, a downward revision from previous estimates, indicating a generally subdued economic climate.

Governor Andrew Bailey highlighted the risk of a more severe jobs market decline, with unemployment nearing a five-year high. Despite these concerns, the Bank anticipates that recent fiscal measures will contribute to bringing inflation down towards the 2% target as early as April. Inflation has already shown a downward trend, falling to 3.2% in November from 3.6% in October.

However, the Monetary Policy Committee's decision was not unanimous, with a 5-4 split revealing internal divisions. While the rate cut is expected to lead to cheaper mortgage deals, some members remain wary of persistent high pay growth not matched by productivity increases. The scope for further substantial rate reductions is considered limited, suggesting a cautious approach to future monetary policy.