The Bank of England is expected to cut interest rates to 3.75% in their final meeting of 2025, with a 91.5% likelihood of a rate cut according to interest rate swaps data. The governor, Andrew Bailey, is expected to cast the deciding vote for the cut.

UK inflation remains high at 3.6% and is above the Bank of England’s 2% target. Despite this, the economy is weak and expected to continue declining into 2026. Data shows a fall in GDP in October and rising unemployment rates.

Investors do not anticipate further rate cuts in 2026, but large institutional investors predict up to three more 0.25% cuts following the December cut. This could lead to inflation dropping swiftly and pave the way for a rebound in growth in 2026.

Read more at Morningstar: Will the Bank of England Cut Interest Rates in December?