Chancellor Rachel Reeves has seized on the Bank of England’s latest move as a key political victory, framing the rate cut to 3.75% as historic. By highlighting that this represents the “fastest pace of cuts in 17 years,” Reeves is attempting to draw a line under the era of economic instability and position the Labour government as the architects of recovery. Her narrative focuses on the speed of relief reaching families and businesses.
The Chancellor’s statement connected the rate cut directly to her government’s policies, implying that her fiscal discipline and inflation-fighting measures paved the way for the Bank’s decision. She cited the energy bill support package as a crucial tool that gave the Bank the “room to manoeuvre.” This coordination between the Treasury and the Bank is central to Labour’s economic pitch to voters.
However, the political victory lap faces challenges from the business sector. Critics argue that the Chancellor’s own budget, specifically the hike in national insurance, has contributed to the economic slowdown that necessitated the rate cut. The Bank of England acknowledged this, listing the tax rise as a shock that restrained inflation’s fall. Reeves has to balance taking credit for the cut while dodging blame for the slowdown.
Despite the criticism, the headline number is a win for the government. Lower mortgage rates are a tangible benefit that voters feel in their pockets. As the pre-Christmas period is a time of high spending, the timing of the announcement couldn’t be better for a Chancellor looking to boost national morale.
The risk for Reeves is that the “fastest pace” slows down. If the Bank pauses cuts in 2026 due to inflation fears, the government’s narrative of rapid improvement will stall. For now, however, the message is clear: the plan is working, and the cost of borrowing is coming down at record speed.
38