Before Christmas, the Bank of England cut interest rates to their lowest level in nearly three years, benefiting British households, and hinting that inflation is cooling fast enough to further relax policy in 2026. The minutes of the meeting released on Thursday showed that the Monetary Policy Committee decided to lower the benchmark interest rate by 25 basis points to 3.75% by a 5-4 vote. This is the first time interest rates have been cut since August, when the nine-member committee chose to stay on hold in the previous two decisions. Among the five members supporting interest rate cuts, three, including Governor Bailey, said they would focus on wage pressure, while dovish officials Dingela and Taylor emphasized the downside risks of growth and inflation. The Commission said current evidence suggests that borrowing costs will continue to fall next year. However, using the new wording, the bank carefully notes that as the central bank gradually approaches neutral interest rates, the decision to cut interest rates in the future will require careful trade-offs. The Bank of England said that the uncertainty of neutral interest rate estimates may bring the probability that members of the Monetary Policy Committee will be closer between further easing and staying the same.

Before Christmas, the Bank of England cut interest rates to their lowest level in nearly three years, benefiting British households, and hinting that inflation is cooling fast enough to further relax policy in 2026. The minutes of the meeting released on Thursday showed that the Monetary Policy Committee decided to lower the benchmark interest rate by 25 basis points to 3.75% by a 5-4 vote. This is the first time interest rates have been cut since August, when the nine-member committee chose to stay on hold in the previous two decisions. Among the five members supporting interest rate cuts, three, including Governor Bailey, said they would focus on wage pressure, while dovish officials Dingela and Taylor emphasized the downside risks of growth and inflation. The Commission said current evidence suggests that borrowing costs will continue to fall next year. However, using the new wording, the bank carefully notes that as the central bank gradually approaches neutral interest rates, the decision to cut interest rates in the future will require careful trade-offs. The Bank of England said that the uncertainty of neutral interest rate estimates may bring the probability that members of the Monetary Policy Committee will be closer between further easing and staying the same.