18 December 2025
If you are covering the Bank of England’s decision to cut interest rates to 3.75%, please find below a comment from Lindsay James, investment strategist at Quilter:
“It should come as no surprise that the Bank of England has cut interest rates today, by a margin of five in favour to four against. Growth is weak, unemployment is rising and, crucially, inflation is falling. This trifecta gives you the ingredients required for an interest rate cut and the Monetary Policy Committee has delivered. While this brings interest rates below 4% once again, the big question going into next year is how much lower can they go? Today’s statement says that ‘judgements around further policy easing will become a closer call’, suggesting that rates may not go down as fast as some may like.
“Inflation is coming down and looks to be supportive to future rate cuts. Measures in the Budget and a slowing labour market would indicate that a lid will be kept on inflation next year. With economic growth also in the doldrums, and showing no sign of improvement in 2026, there will be a huge amount of pressure on the Bank of England to help stimulate some sort of economic activity, even if the fiscal picture looks anaemic.
“There is a chance the UK slips into a recession in 2026 given the weak growth we saw in September and October. November’s data is likely to be similar and it doesn’t feel like it would take a lot for a recession to be triggered. However, the market is pricing in just a further two cuts by the end of next year, which would suggest the UK isn’t out of its inflationary pickle just yet, especially as wage pressures remain ever prevalent.
“Ultimately, there is little going right for the UK economy as Christmas approaches. While manufacturing has rebounded, services has slowed, and construction remains a significant drag on the economy. The government is facing a crunch year in 2026 and if it can’t find economic growth from somewhere then it is likely to run out of road. The BoE will cut when it can, as it has today, but given the UK’s inflation problem, it can’t keep cutting to magic up some growth.”
