Bank of England cuts key interest rate from 4% to 3.75%

Core Viewpoint - The Bank of England has cut its key interest rate for the first time in four months to 3.75% as inflation begins to ease, providing an opportunity to stimulate the stagnant economy [1][3]. Economic Indicators - Consumer price inflation in the UK slowed to 3.2% in the 12 months through November, down from 3.6% the previous month, and below the Bank of England's forecast of 3.4% [2][3]. - The unemployment rate has risen to 5.1%, the highest since January 2021, indicating a weakening job market with declining job vacancies [3][4]. Monetary Policy - The decision to cut interest rates was made by a narrow vote of 5-4 among policymakers, reflecting a division in focus between combating inflation and supporting economic growth [1][4]. - The inflation rate in the UK remains significantly higher than the Bank of England's target of 2%, with UK consumer prices rising faster than in other regions, such as the Eurozone (2.1%) and the U.S. (3.0%) [5]. Economic Growth Considerations - Lower interest rates are intended to stimulate economic growth by reducing borrowing costs, which can lead to increased consumer spending and business investment, although this may also contribute to higher prices [5][6]. - Central bankers face the challenge of balancing the need to control inflation while not hindering economic growth [6].