The Bank of England (BoE) has announced a 0.25% cut to its base rate, bringing interest rates down to 3.75%, the lowest level since February 2023.

The latest move marks the sixth time the central bank has cut interest rates since August last year, when it started its cutting cycle from a peak of 5.25%.

At its meeting this week, the nine members on the BoE’s Monetary Policy Committee (MPC) voted by a majority of five to four to reduce the base rate by 0.25%, with four members in favour of maintaining rates at 4%.

The decision to cut the base rate follows yesterday's announcement by the Office for National Statistics (ONS) that inflation had fallen to 3.2% in the year to November, the lowest annual rate since March.

According to the BoE report published today, the MPC is expecting inflation to fall back towards the 2% target “more quickly in the near term”.

“The risk from greater inflation persistence has become somewhat less pronounced since the previous meeting, while the risk to medium-term inflation from weaker demand remains,” the MPC stated.

Chief investment officer at Hargreaves Lansdown, Emma Wall, said the cut to the base rate was no surprise following the latest inflation data.

She added: "While inflation is falling, it is still far above the BoE's target of 2%, and the MPC voting record revealed that four members favoured a hold today – likely because of these pricing concerns.

"The FTSE 100 has reacted positively to the news – up on the open, although the cautious forward guidance has mean that it has given back some marginal gains on earlier trading. Lower interest rates are good news for any corporate with leverage, and has the potential to boost domestic consumption too, which in turn could support corporate revenues."

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