Bank of England officials are poised to make a crucial decision on borrowing costs, armed with fresh data showing a significant and unexpected drop in inflation. The latest figures have intensified the debate over whether to cut interest rates to support the UK's struggling economy.
Inflation Cools Faster Than Forecast
Official data released on Wednesday 17 December 2025 revealed that the annual inflation rate fell to 3.2 per cent in the year to November. This marks a notable decline from the previous month's figure of 3.6 per cent and came in well below market expectations. While it remains above the Bank's 2 per cent target, it represents the lowest annual rate recorded since March.
Grant Fitzner, the chief economist at the Office for National Statistics (ONS), confirmed the trend, stating inflation "fell notably" during the month. The ONS identified specific items, including cakes, women's clothing, and tobacco, as the main drivers of inflation for November. Core inflation, which strips out volatile elements like energy and food, also stood at 3.2 per cent.
Pressure Mounts on the Bank's Policymakers
This final piece of economic news arrives just as the Bank of England's Monetary Policy Committee (MPC) prepares to cast its final vote of the year. The committee faces intense pressure to lower borrowing costs to revive the UK's faltering jobs market, which recently saw the highest number of redundancies in a three-month period since the pandemic.
Supporting the case for a cut, wage growth in the private sector showed signs of cooling, easing to 3.9 per cent. Anna Leach, chief economist at the Institute of Directors, argued independently that falling inflation expectations and potential hits to demand justify a reduction. "Various measures are moving in the 'right' direction to support further rate cuts," she said.
The Divisive Rate-Setting Decision
Economists on City AM's Shadow Monetary Policy Committee have already voted in favour of a 25 basis point cut, which would bring the base rate to 3.75 per cent. However, dissent remains. Some economists, including Julian Jessop and former MPC member Jonathan Haskel, warn the Bank must stay focused on squeezing out all lingering inflationary pressures.
While a cut is widely anticipated, Governor Andrew Bailey's final call is shrouded in some caution. The MPC is expected to be split, with members like Clare Lombardelli, Megan Greene, Catherine Mann, and Huw Pill predicted to vote for holding rates steady. In contrast, Swati Dhingra, Alan Taylor, Sarah Breeden, and Dave Ramsden are forecast to support a cut, potentially leaving Governor Bailey as the decisive swing vote.
