Thu, 18 Dec 2025

Thu, 18 Dec 2025 Faisal Islam: Will 'Santa rate cut' have enough festive spirit to boost the economy?

The Bank of England is hoping the interest rate cut will inject some much-needed momentum into the economy.

* Andrew Bailey, Governor of the Bank of England, delivered a "Santa cut" interest rate decision, cutting rates in a move seen as pumping life into a subdued economy.
* The decision was made by the narrowest of margins, with Bailey as the swing voter, and is seen as a sign that the UK has passed the peak of inflation.
* Rates will now return to target sooner than expected, in April rather than early 2027.
* The Bank forecast that the economy is not growing in the current quarter and described it as "lacklustre".
* Businesses told the Bank there had been no rebound yet, despite the uncertainty around the Budget lifting.
* The Governor identified an unusually high rate of savings as holding back the economy, driven by a lack of consumer confidence among older savers.
* Rate cuts are expected to mechanically lower the incentive to save and help spending.
* Inflation is forecast to be brought down by measures cutting energy prices and freezing rail fares.
* Customers will see a significant increase in the amount of money protected if their bank collapses as a result of the rate decision.
* US stock price valuations are seen as the most stretched since the dotcom bubble burst.
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