Bank of England’s latest decision on base rate

The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 5-4 to lower the base rate to 3.75% at its December meeting⁽¹⁾.

Four members of the MPC had voted instead to maintain Bank Rate at 4%.

In setting out the context to the vote, the MPC said: ‘Monetary policy is being set to ensure CPI inflation settles sustainably at 2% in the medium term, which involves balancing the risks around achieving this. The risk from greater inflation persistence has become somewhat less pronounced since the previous meeting, while the risk to medium-term inflation from weaker demand remains.’

The MPC acknowledged that 12-month CPI inflation eased to 3.2% in November 2025 and that quarterly CPI inflation is expected to continue this downward trajectory in 1Q2026, decreasing to around 3%.

It reported: ‘The extent of further easing in monetary policy will depend on the evolution of the outlook for inflation. The restrictiveness of policy has fallen as Bank Rate has been reduced by 150 basis points since August 2024. On the basis of the current evidence, Bank Rate is likely to continue on a gradual downward path. But judgements around further policy easing will become a closer call.’

Reacting to the decision, Dr David Crosthwaite, chief economist at BCIS, said: ‘A cut to Bank Rate was expected and is positive news. Inflation has been cooling and given the wider economic headwinds in the lead up to and following the Budget, the Bank of England is likely looking to try and stimulate the economy.

‘Any cut to the rate of borrowing is welcome news for investors and therefore construction, although the impacts won’t be felt overnight.’

The MPC’s next vote will be published on Thursday 5 February 2026.

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^{(1) Bank of England – Bank Rate reduced to 3.75% – December 2025 Monetary Policy Summary and Minutes – here}