Bank of England cuts interest rate to 4.75%

The Bank of England has today reduced its Base Rate to 4.75%, a widely anticipated move following a steady decline in inflation that now sits at 1.7%—below the central bank’s 2% target for the first time in three years. This marks the second rate cut by the Bank in less than three months as it continues to navigate a shifting economic landscape.

In a vote by the nine-member Monetary Policy Committee (MPC), the decision to lower the Base Rate by 0.25 percentage points passed with a majority of 8-1. One member favoured maintaining the rate at 5%, signalling concerns over potential economic risks. This cut comes after the BoE reduced rates in August for the first time in more than four years, following a drop in inflation to the central bank’s target rate.

The Bank of England’s next Base Rate decision will be announced on December 19^th.

Mike Randall, CEO at Simply Asset Finance, noted: “After the uncertainty surrounding the Budget, this will hopefully give businesses a clearer path for growth, allowing them to tap into pent-up demand and make strategic investments that had previously been put on ice.

“And for those businesses that will be looking to mitigate the newfound pressures from the National Insurance rise, it will offer some much-needed reassurance.

“But in order to achieve and exceed the Chancellor’s ambitious growth targets set out in her Autumn Statement, the SME community needs more; more certainty to make big decisions; more support to innovate and expand: more incentives to invest in the long-term future of their business and their employees. Only then we can be confident that the Government’s goal of rebuilding Britain can be achieved.”

Neil Rudge, chief banking officer for Commercial at Shawbrook, said: “A further cut to the base rate this year is welcome news for SMEs, as it signals lower borrowing costs as a direct result of the Bank of England’s decision.

“Business leaders have faced considerable uncertainty this year with a general election, a new Government, and the recent Autumn Budget all contributing to a challenging landscape for enterprises. While the rise in employer National Insurance contributions and minimum wages signals increased costs for firms, the budget has eliminated speculation and uncertainty, enabling businesses to move forward, cautiously with their growth plans. We’re seeing continued resilience from business leaders, particularly in the mid-sized market, with a consistent appetite for new finance to fund ambitions.”

Michael McGowan, Managing Director, Foreign Exchange at Bibby Financial Services, said: “While the recent UK Budget may have rattled businesses, today’s interest rate cut could be a welcome fillip for small businesses looking to invest and grow.

“However, muted expectations of further UK rate cuts into next year, a new US administration, and continuing geopolitical turmoil make for a still uncertain economic outlook. That means SMEs would be wise to plan for a variety of outcomes – continuing to be ambitious, but also ensuring their plans are based on prudent cost and cashflow management. And businesses trading internationally should ensure they protect themselves against currency risk with coherent FX strategies.”

Scott Douglas, Director of Capital Markets at international corporate finance firm Centrus, commented: “Though the interest rate cut was to be expected, there are fears that a number of inflationary forces have recently been unleashed.

“The raising of elements such as employer national insurance contributions in the recent budget, and the potential impact of Trump’s victory on the strength of the dollar and import costs, could lead to elevated costs. Consequently, the Bank of England’s rate cutting trajectory could be less steep than anticipated, and higher than expected borrowing costs will impact consumers and businesses – while also weighing on UK bond and equity prices.”