Bank of England cuts interest rates to 3.75% in pre-Christmas boost for struggling economy

"The Bank of England has cut interest rates by a quarter point for the fourth time this year, delivering a pre-Christmas boost to the struggling UK economy. After leaving borrowing costs on hold in a split vote last month before the budget, the Bank's nine-member monetary policy committee (MPC) said on Thursday it would reduce the base rate from 4% to 3.75%."

"Labour hopes lower borrowing costs will help underpin confidence and rekindle economic growth by making it cheaper for consumers and companies to borrow. Thursday's cut was widely expected, after four MPC members backed a cut in November, and official data published on Wednesday showed that inflation fell last month to an annual rate of 3.2%, from 3.6% in October. That remained well above the Bank's 2% target, set by the government, but suggested inflation had peaked."

"Bank rate-setters may also have been influenced by recent weak GDP data. An early estimate published last week suggested the economy unexpectedly shrank by 0.1% in October, marking four successive months without growth. Business groups have blamed Reeves's 25bn increase in employer national insurance contributions, alongside the extended period of uncertainty before this year's budget, for putting the brakes on the economy."

Bank of England reduced the base interest rate by 0.25 percentage points to 3.75% after a split vote left rates on hold last month. The nine-member Monetary Policy Committee approved the cut to provide a pre-Christmas boost to a struggling UK economy. The move represents the fourth cut this year and the sixth since Labour took power last year. Chancellor Rachel Reeves had introduced budget measures intended to increase the Bank's room to reduce borrowing costs. Official data showed inflation fell to 3.2% in November, while an early GDP estimate indicated a 0.1% contraction in October, and business groups cited tax rises and uncertainty.

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