The BoE's Monetary Policy Committee voted 5-4 in favor of the quarter-point reduction, while four members voted to keep the rate unchanged.

The decision marks the sixth rate reduction since August 2024, when the central bank began easing monetary policy from a 16-year-high rate of 5.25 percent. Overall, interest rates have been lowered by a cumulative 150 basis points over the period.

The Bank said Consumer Prices Index (CPI) inflation had fallen to 3.2 percent, down from 3.6 percent at the time of the previous meeting. Although inflation remains above the BoE's two percent target, policymakers said it is now expected to move back towards the target more quickly in the near term.

Latest data from the Office for National Statistics showed that real gross domestic product contracted by 0.1 percent in the three months to October 2025, showing weak underlying momentum across the sectors. Over the same period, the unemployment rate rose to 5.1 percent, the highest level in nearly five years outside the pandemic period, while payroll employment declined.

The rate cut was welcomed by British Chancellor of the Exchequer Rachel Reeves. She said the decision was "good news" for households with mortgages and businesses with loans, adding that it was the fastest pace of reductions in 17 years. She said the government would continue measures to ease cost-of-living pressures, including a decrease in household energy bills and a freeze on rail fares.

Looking ahead, the Bank said the extent of further easing in monetary policy will depend on the evolution of the inflation outlook. While the risk of inflation persistence has become less pronounced since the previous meeting, risks to medium-term inflation from weaker demand remain. 

Source: Xinhua