Seven members on the Monetary Policy Committee (MPC) voted to reduce the rate by 0.25%, the lowest level since May 2023, with two members wanting to see the rate slashed by 0.5%.

The Bank claimed the interest rate was cut after ‘substantial progress on disinflation over the past two years’ although it warned that it was focused on ‘maintaining the bank rate in restrictive territory’.

Andre Bailey, governor of the Bank said: ‘We live in an uncertain world, and the road ahead will have bumps. We expect inflation to increase this year, to a peak of about 3.7%, before returning to the 2% target. We will set Bank Rate to ensure that it does so sustainably.’

With inflation up at 2.5% and GDP growing minimally by 0.1% in November, Nigel Green, CEO of deVere Group, said the third rate cut in a year could be a signal of bad news.