Interest rates cut to 3.75%

19 Dec 2025

The Bank of England has cut interest rates from 4% to 3.75%, bringing the cost of borrowing down to its lowest level in nearly three years.

The Monetary Polic Committee (MPC) voted 5-4 in favour to lower rates from 4%, reflecting concerns over unemployment rising and weak economic growth.

The Bank says rates are 'likely to continue on a gradual downward path' going forward, but warned that judgements on further cuts next year would more contested.

Stuart Morrison, Research Manager at the British Chambers of Commerce (BCC) said the cut was a 'much-needed Christmas gift for businesses across the UK'.

He added: 'However, unwrapping growth remains a huge challenge. With the economy flatlining, wage growth slowing, unemployment up and inflation easing – [the] Bank of England's decision was widely expected.

'Nevertheless, the MPC is likely to need more evidence that inflation is under control before agreeing to further rate cuts next year. The close vote by the committee underlines the uncertainty ahead.

'With firms being hit by the high cost of borrowing, and a raft of other financial pressures, their confidence remains low. Last month's Budget was a missed opportunity to drive significant growth.

'2026 must be a year of delivery by government to give business the powerful tools to drive forward growth. We urgently need to see action on planning, regulation, skills, boosting trade and supporting AI adoption.'