Bank of England cuts policy rate by 25 basis points, matching forecasts

ISTANBUL

The Bank of England on Thursday lowered the policy rate by 25 basis points to 3.75%, in line with market expectations.

The move followed the central bank's decision to hold the rate steady at its two previous meetings. The Bank Rate currently stands at its lowest level since 2022.

The decision was taken by the bank's Monetary Policy Committee by a narrow 5-4 vote. Five members voted for a 25 basis point rate cut, while four others voted for no change.

"CPI inflation has fallen since the previous meeting, to 3.2%. Although above the 2% target, it is now expected to fall back towards the target more quickly in the near term," a bank statement said.

"Reflecting restrictive monetary policy, and consistent with evidence of subdued economic growth and building slack in the labor market, pay growth and services price inflation have continued to ease," it noted.

Stating that monetary policy is being set to balance the risks around meeting the 2% inflation target sustainably, the central bank said the risk of greater inflation persistence has become "somewhat less pronounced" since the previous meeting, while the risk to medium-term inflation from weaker demand remains.

"The extent of further easing in monetary policy will depend on the evolution of the outlook for inflation," it said, noting that on the basis of the current evidence, the policy rate is likely to continue on a gradual downward path.

"But judgments around further policy easing will become a closer call," the central bank added.

Annual consumer inflation in the UK slowed to 3.2% in November, the lowest level in eight months, from 3.6% in October.