The cut to 3.75% sets the stage for 2026. The Bank of England is aiming for the “soft landing”—bringing inflation down without crashing the economy into a deep recession. The data is mixed: inflation is down (good), but GDP is shrinking (bad). The plane is wobbling.
The “doves” predict that lower rates will lift confidence in Q1, leading to a gentle recovery by summer. They see the “closer call” language as caution, not a stop sign. They believe the UK will outperform the gloomy IMF forecasts.
The “hawks” predict that service inflation will stay high, forcing the Bank to hold or hike rates again, causing a “hard landing” later in the year. They see the wage demands of 3.5% as the turbulence that will crash the plane.
The public just wants stability. They want to know their mortgage won’t go up and their food bill won’t explode. The rate cut offers hope, but no guarantees.
2026 will be the year of the verdict. Did the Bank of England pull off the impossible, or did they cut the parachute cord too early? The 3.75% rate is the gamble; the outcome is yet to be written.