Bank of England urged to cut interest rates to boost consumer spending

TUC analysis found that spending by UK consumers is lagging behind their international counterparts, though interest rate setters are worried about stoking inflation.

Last month, the bank’s monetary policy committee voted five-to-four to leave borrowing costs unchanged, having slashed interest rates six times since mid-2024.

While the Bank of England remains anxious about the risks of high wage growth adding to persistent inflation, the TUC argues that weak consumer spending and economic growth is the more pressing issue for the economy.

TUC general secretary Paul Nowak told The Guardian: “The Bank of England has a crucial role to play here. Last year they were overly cautious and too slow to act. They should go for growth with a sequence of quick-fire cuts this year.

“Lower interest rates would help households and help the high street – putting money in people’s pockets to spend in shops and restaurants, and boosting confidence for consumers and for businesses.”

The latest Office for National Statistics figures showed that GDP expanded just 0.1% in the final quarter of 2025. The TUC said this was due to consumer confidence being depressed by high borrowing costs.

Its analysis found that consumer demand has grown more slowly in the UK in the last three years than in 32 of the other 37 industrialised economies in the Organisation for Economic Cooperation and Development.

The TUC said while consumer demand has accounted for two-thirds of economic growth since 2008, it has made almost no contribution at all to growth over the last two years.

The Bank of England is expected to cut interest rates at its next meeting in March following February’s vote, though markets are not expecting a repeat of last year’s repeated run of reductions.