As had been widely expected, the Bank of England reduced the interest base rate to 4.75% last week. This was due to inflationary pressures easing in recent weeks.
The Bank expects inflation to increase slightly again over the next year to around 2.75% and then fall back to the 2% target after that.
In their quarterly report, the Bank outlined that they will be taking a cautious approach and so will not be cutting rates too quickly or too much. It seems unlikely there will be a further cut when the Bank next meet on December 19th.
However, the Bank have said that “if things evolve as expected, it’s likely that interest rates will continue to fall gradually.”
Obviously, a rate cut can be a mixed blessing depending on whether your business is investing or borrowing. However, if inflation is stabilising this may mean a more stable economy and more certainty for businesses in the year ahead.
See: https://www.bankofengland.co.uk/monetary-policy-report/2024/november-2024
The UK economy continues to show a mixed picture, with recent data highlighting both relief for households and ongoing challenges for businesses.
With 2025 coming to a close, you may already be starting to reflect on how the year unfolded in your business.