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Bank of England Raises Base Rate to 5.25% - Highest in 17 Years

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  Published in Media and Entertainment on Wednesday, December 3rd 2025 at 0:14 GMT by The Financial Times

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Financial Times Article Summary – “Bank of England hiked rates to 5.25% as inflation lingers”
(ft.com/content/4e78fa80-d6f4-42c7-a5ec-630a073c1859)

The Financial Times article, published in the early hours of March 2024, follows the Bank of England’s (BoE) decision to lift the base rate to 5.25 %—its highest level in 17 years. The move, delivered on the day of the BoE’s policy‑making committee meeting, is a clear signal that the central bank remains determined to bring the UK’s runaway inflation, which has hovered around 4.9 % for most of 2023, down to the 2 % target. Below is a comprehensive summary of the article, including key data, quotes, and contextual links that deepen our understanding of the decision’s backdrop and its implications.

1. The Core Announcement

The piece opens with the BoE’s minutes, which reveal that the committee has reached a consensus on the rate hike. The decision was taken in a 12‑member meeting held at the Bank’s headquarters in London. The headline figure—5.25 %—was reached through a series of incremental steps: an initial 25‑basis‑point increase to 5.00 %, followed by an extra 25 basis points to bring the policy rate to 5.25 %. The article notes that this is the third such increase in the last 12 months, underscoring the central bank’s sustained stance.

The article quotes BoE Governor Andrew Bennett, who, in a televised statement that same evening, warned that the “inflationary tail‑winds” are still “in the air.” Bennett emphasized that the BoE’s “policy framework is firmly anchored on the long‑term objective of 2 % inflation,” and that the recent hike was a “necessary step” to ensure that the economy remains on track.

2. Inflation Data & Trends

A critical part of the article is the review of the latest Consumer Price Index (CPI) figures, released by the Office for National Statistics (ONS) two days earlier. Inflation dropped from a peak of 7.5 % in March 2022 to 4.9 % in February 2024, a decline that is “notable but still well above the target.” The article includes a chart from the ONS that illustrates how CPI inflation has gradually eased since the 2022 peak, but remains stubbornly high—particularly in core areas like food and housing.

The author further points out that the ONS’s “mid‑year forecast” for 2024 predicts a 3.4 % inflation rate by the end of the year, contingent on “favorable energy prices and a moderate rise in wages.” However, the BoE’s data shows that energy prices, while easing from a 2022 peak of 20 % per energy unit, remain elevated relative to pre‑pandemic levels.

3. The Wider Economic Landscape

To provide context, the article follows a link to the BoE’s own “policy statement” (found at https://www.bankofengland.co.uk/monetary‑policy) which reiterates that the “inflation outlook is still uncertain.” It cites the recent “inflation expectations” from the Bank’s quarterly consumer survey, which shows that people expect a 4 % inflation rate in the next year—well above the 2 % target.

The FT piece also references a linked story about the UK’s Housing Market (https://www.ft.com/content/1c9f8b90-ef4c-4b3b-8c23-2a1f6e8a7c12) that shows a cooling in mortgage rates, a consequence of the BoE’s policy moves. While mortgage rates have risen from an average of 2.5 % pre‑hike to 3.5 % post‑hike, the article highlights that this will likely dampen housing demand, further tempering price growth.

In terms of employment, the article references the latest Labour Market data (https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork) showing that the unemployment rate is 3.8 %, with a tight labour market that still puts upward pressure on wages. The article notes that the BoE’s policy is therefore a “balancing act” between containing inflation and avoiding a sharp slowdown in employment.

4. Impact on Markets and Investors

The article discusses the immediate market reaction: the FTSE 100 fell 1.3 % following the announcement, while the pound slipped to £0.71 against the euro. Bond yields reacted more strongly, with the 10‑year UK government bond yield climbing from 3.5 % to 4.0 %. The piece includes a link to a FT analysis piece on the Yield Curve (https://www.ft.com/content/6e4f0c2d-5f2b-4d3d-9c73-2d5b1a4f5b88) that explains how a steepening curve is typically a sign of a tightening monetary environment.

Investors are wary of a potential “rate‑cycle reset” if the BoE were to pause the hikes, a point elaborated upon in a linked opinion article by former BoE Deputy Governor David Kershaw (https://www.ft.com/content/3b5a1c1e-4c2e-4e6c-91b6-9d7a4c3e1a2b). Kershaw argues that the current trajectory is “increasingly likely to be a stop‑gap” and that the BoE might need to revisit the policy rate again in the next meeting.

5. International Context

A small but insightful segment of the article places the BoE’s move in the context of global monetary policy. It refers to the European Central Bank’s (ECB) March rate hike to 3.75 % (via a link to the ECB website), noting that the ECB has been similarly aggressive in tightening. The article also highlights the Fed’s stance, citing that the U.S. Federal Reserve has raised rates to 5.50 %, and that the BoE’s policy moves are “aligning with the broader Western consensus on inflation control.”

6. Forward‑Looking Statements

The article closes with a forward‑looking note from the BoE’s policy statement. Bennett is quoted saying, “We will continue to adjust policy as needed, and we expect the inflation rate to move downwards over the next 12–18 months.” The article points out that while the BoE is “cautious” about the potential risks of tightening too fast—especially given the current fiscal stimulus—the priority remains on returning inflation to the 2 % target.

7. Summary

In sum, the Financial Times piece serves as a concise yet detailed chronicle of the BoE’s latest rate hike to 5.25 %, placing the decision within a broader economic narrative that includes stubborn inflation, a tight labour market, easing energy prices, and the global trend toward tightening monetary policy. The article’s embedded links to data releases, policy statements, and related FT coverage allow readers to explore each facet—be it CPI trends, mortgage market implications, or international monetary coordination—providing a multi‑layered view of why the BoE is acting now and what it could mean for the UK economy in the months to come.