BoE Set to Cut Interest Rates As UK Inflation Finally Cools

London, November 2 2025 — The Bank of England or BoE Set to Cut Interest Rates after fresh economic data revealed a sharp decline in inflation and slower wage growth.
The move could mark a major shift in the UK’s monetary stance after two years of aggressive tightening.

UK Inflation Falls to Its Lowest Since 2021

The UK’s annual inflation rate dropped to 3.8 % in September 2025, its lowest level in over two years, edging closer to the BoE’s long-term 2 % target.
Falling energy and transport costs, alongside easing global supply bottlenecks, have been the main drivers.
As reported by Financial Times, the figures signal that Britain’s inflation surge may finally be under control.

Wage Growth Slows, Pressure on Prices Eases

Regular wage growth — a key measure of inflation persistence — has weakened to its lowest pace since 2021.
This decline suggests that labor-market pressure is easing, creating room for policymakers to lower borrowing costs.
According to Ruth Gregory of Capital Economics, “The slowdown in wages strengthens the case for a rate cut before the end of the year.”

Markets Now See 30 % Chance of Rate Cut

Money-market traders now price a 30 % probability of a BoE rate cut at its next meeting — up from just 5 % in September.
Analysts anticipate a 0.25-point reduction, which could start a broader global cycle of monetary easing.
Reuters noted that such a move could revive business investment and ease household debt burdens.

Impact on Consumers and Businesses

A lower benchmark rate would mean cheaper mortgages, auto loans, and business credit, providing relief for households and small firms.
Sectors like housing, retail, and manufacturing are expected to rebound as borrowing costs drop.
The BoE aims to stimulate domestic demand without reigniting inflationary pressure.

Stable Energy Prices Support the Shift

The recent OPEC+ statement confirming steady oil output through 2025 has helped keep energy costs stable.
This stability strengthens the BoE’s confidence that external price shocks are under control, making monetary easing less risky.

Signal to Global Central Banks

If the BoE moves first, it could set the tone for other major central banks — such as the Federal Reserve and the European Central Bank — to follow.
A UK rate cut may boost global investor sentiment, push equities higher, and lower long-term bond yields worldwide.

Structural Challenges Remain

Despite encouraging data, the UK still faces weak productivity, tight fiscal conditions, and fragile consumer confidence.
Economists warn that cutting rates too early might risk another inflation rebound in early 2026.

Market Reaction and Investor Outlook

The FTSE 100 rose 1.3 % after the inflation report, while the pound sterling dipped slightly against the US dollar amid speculation of policy easing.
Investors are watching the BoE’s mid-November policy statement, which could confirm a historic shift in monetary direction.

Economic Outlook for Late 2025

If disinflation continues and labor conditions remain steady, analysts expect at least two additional cuts before mid-2026.
These could help revive growth and ease financial pressure across key sectors like real estate, retail, and banking.

Conclusion

The anticipated BoE rate cut marks the beginning of a new monetary chapter for the UK.
With inflation cooling and wage pressure subsiding, the Bank now has room to support growth without undermining price stability.
If executed carefully, this pivot could restore global confidence heading into 2026.