Central Bank Policy

December’s Double-Header: BoE Cuts, ECB Holds—What It Means for 2026

With Katharine Neiss, PhD — Dec 18, 2025

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December delivered a double-header of central bank moves. The Bank of England cut rates to 3.75%, but with a hawkish tone as four MPC members voted to hold at 4%, signaling that future cuts will be harder to justify. Meanwhile, the ECB kept rates at 2% and updated its forecast showing inflation undershooting through 2027, raising questions about how expectations will remain anchored.

Katharine Neiss, PhD, Deputy Head of Global Economics, explains why we expect further Bank of England cuts in 2026 as growth slows and inflation falls, and why the ECB is likely to make a modest move to 1.75% before shifting back to rate hikes.

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