SMPC votes to cut UK base rate by 25bps to 3.5%
At its quarterly (hybrid) meeting on 13 January 2026, the Shadow Monetary Policy Committee (SMPC), hosted by the Institute of Economic Affairs (IEA), voted by a 5:4 majority to cut the UK Base Rate by 25 basis points, bringing it to 3.5%. The committee also voted to maintain Quantitative Tightening (QT) at its current pace. A majority expressed no bias toward further rate cuts, adopting a “wait and see” approach.
Voting Summary
Cut 50bps
- Trevor Williams – Maintain QT; Bias to ease
Cut 25bps
- Roger Bootle – Maintain QT; No bias
- Graeme Leach – Maintain QT; No bias
- Julian Jessop – Maintain QT; No bias
- Kent Matthews – Maintain QT; No bias
Hold
- Tim Congdon – Maintain QT; No bias
- Juan Castaneda – Halt QT; No bias
- Andrew Lilico – Maintain QT; No bias
- Peter Warburton – Suspend QT; No bias
Economic Justifications
Juan Castaneda – Hold; Halt QT
Castaneda said current money growth is fully compatible with achieving the 2% inflation target alongside trend GDP growth of around 1%. He voted to hold rates and halt QT to avoid unnecessary tightening.
Tim Congdon – Hold; Maintain QT
Congdon said broad money growth is in the desired 3–5% range and policymakers should avoid major changes. He highlighted the need to reform interest payments on bank reserves over the medium term and supported maintaining QT.
Graeme Leach – Cut 25bps
Leach supported a 25bps cut, saying his earlier presentation set out the case for a modest reduction. He argued that money supply growth should be kept on its current subdued trend.
Peter Warburton – Hold; Suspend QT
Warburton warned of a possible oil price resurgence and fragility in the global credit system, which could undermine the inflation outlook. He said recession risks are rising and voted to hold rates while suspending QT.
Andrew Lilico – Hold; Maintain QT
Lilico said inflation remains above target and monetary growth is broadly where it should be, giving no strong reason to change rates. He viewed recession risks as supplydriven and supported maintaining QT.
Roger Bootle – Cut 25bps; Maintain QT
Bootle argued the labour market is weakening, with expected job losses, slower pay growth and rising unemployment likely to push inflation down sharply. He supported a 25bps cut and expressed concern about political and fiscal risks ahead of the May elections.
Julian Jessop – Cut 25bps
Jessop said inflation is on track to fall sharply due to base effects and is likely to hit the 2% target soon. With the economy on the brink of recession and confidence weak, he said interest rates are higher than needed.
Trevor Williams – Cut 50bps; Maintain QT
Williams said recession risks remain but expects growth close to the 1¼% trend, with money growth pointing to stable medium term inflation and a short term risk of undershooting. He argued that real rates are too high for indebted households and that UK monetary policy is tighter than in the eurozone.
Kent Matthews – Cut 25bps; Maintain QT
Matthews said money growth is consistent with longterm 2% inflation, but inflation expectations assume further cuts. He warned that holding rates would raise real interest rates above equilibrium and supported maintaining QT.
Next Meeting
14 April 2026