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    The Bank of England lowers the Bank Rate to 3.75% after a 5–4 vote

    by VT Markets
    /
    Dec 18, 2025
    The Bank of England has lowered the Bank Rate by 25 basis points, bringing it down to 3.75%. This decision stemmed from a close 5-4 vote, reflecting a split opinion within the committee. Many expected a stronger agreement after recent inflation reports. The Monetary Policy Committee does not plan to make more cuts in February. However, they admit that future decisions on rate changes will be harder. Governor Bailey emphasized that there isn’t enough evidence to suggest a significant drop in inflation or wage growth.

    Future Rate Outlook

    Looking ahead, analysts predict two more rate cuts of 25 basis points each in February and April 2026, depending on future data. This shows the committee’s reliance on data when making monetary policy changes. This summary includes insights from the FXStreet Insights Team, who gather views from market experts alongside their own analysis. The Bank of England recently cut rates to 3.75% in a narrow 5-4 vote. This close split indicates differing opinions within the committee, suggesting that future rate changes are uncertain. As a result, we might see increased volatility in GBP currency pairs and UK interest rate markets as we enter the new year.

    Examining UK Inflation and Wage Growth

    The Bank’s cautious approach is supported by recent data. Last week, UK inflation figures showed core CPI unexpectedly holding steady at 3.1%, while the latest wage growth numbers are at 4.2%. Given this persistent trend, strategies that benefit from a fluctuating or stable sterling—like selling short-dated strangles on GBP/USD—could be wise. In the interest rate markets, SONIA futures for February 2026 now suggest there’s less than a 40% chance of an immediate cut, which is a significant decrease from last month. We recall the rapid rate hikes needed in 2023 to manage inflation, and the Bank seems wary of easing too soon. Therefore, it may be wise to prepare for rates to stay steady longer than some anticipate, possibly by paying fixed rates on short-term interest rate swaps. Create your live VT Markets account and start trading now.

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