Emma Wall, Chief Investment Strategist, Hargreaves Lansdown: “What has surprised markets is how tight the vote was however, making the path from here far less certain. While inflation is falling, it is still far above the Bank target of 2%, and the MPC voting record revealed that four members favoured a hold today – likely because of these pricing concerns. Bank Governor Bailey has long drummed that decisions will be data led, and it is interesting to see this in action – jobs data is weaker, and economic growth is non-existent, which could have swayed more members to vote for the cut.

“But to misquote James Carville – ‘it is all about inflation, stupid’.  Bailey has commented in the press conference live now that jobs data is not yet conclusive. The inference being that inflation at 50% higher than target, is. The gilt market is largely unmoved, though we have seen some yields come down a little through the day – a sign that today’s action was already priced in.

“Throughout 2025, the 10-year gilt yield has been broadly range bound. More recently, October saw a notable fall in yields (so a rally in prices) as expectations about future interest rate cuts increased. This was tempered slightly in the build up to the Budget in November, which saw some yield swings as information relating to potential changes in tax policy impacted views around future government spending affordability.

“Since the Budget, yields have been relatively stable and have settled around the lower end of the range for 2025.

“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. The UK large cap index is up 28 points in intraday trading.”

Lindsay James, investment strategist at Quilter: “It should come as no surprise that the Bank of England has cut interest rates today, by a margin of five in favour to four against. Growth is weak, unemployment is rising and, crucially, inflation is falling. This trifecta gives you the ingredients required for an interest rate cut and the Monetary Policy Committee has delivered.

“While this brings interest rates below 4% once again, the big question going into next year is how much lower can they go? Today’s statement says that ‘judgements around further policy easing will become a closer call’, suggesting that rates may not go down as fast as some may like.

“Inflation is coming down and looks to be supportive to future rate cuts. Measures in the Budget and a slowing labour market would indicate that a lid will be kept on inflation next year. With economic growth also in the doldrums, and showing no sign of improvement in 2026, there will be a huge amount of pressure on the Bank of England to help stimulate some sort of economic activity, even if the fiscal picture looks anaemic.

“There is a chance the UK slips into a recession in 2026 given the weak growth we saw in September and October. November’s data is likely to be similar and it doesn’t feel like it would take a lot for a recession to be triggered. However, the market is pricing in just a further two cuts by the end of next year, which would suggest the UK isn’t out of its inflationary pickle just yet, especially as wage pressures remain ever prevalent.

“Ultimately, there is little going right for the UK economy as Christmas approaches. While manufacturing has rebounded, services has slowed, and construction remains a significant drag on the economy. The government is facing a crunch year in 2026 and if it can’t find economic growth from somewhere then it is likely to run out of road. The BoE will cut when it can, as it has today, but given the UK’s inflation problem, it can’t keep cutting to magic up some growth.”