The Bank of England (BoE) kept interest rates unchanged at 3.75% as inflation rose to 3.4% in the year to Dec-25. In its last meeting, the bank had cut Bank Rate (interest rates) by 0.25% to 3.75%. Since August 2024, the central bank cut rates six times. Inflation, though trending downwards over the past year or so, remains above the Bank of England's 2% target. Although above the 2% target currently, CPI inflation is expected to fall back to around the target from April, owing to developments in energy prices including from Budget 2025. Reflecting the impact of monetary policy, and consistent with evidence of subdued economic growth and building slack in the labour market, pay growth and services price inflation have generally continued to ease.
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