Kevin Brown, savings specialist at Scottish Friendly, comments on latest interest rate cut

"While the decision to cut the interest rate was widely expected, the Monetary Policy Committee (MPC) had a range of competing factors to consider. Wage pressures have remained, with the latest data showing a 5.6% uplift in wages in the three months to November 2024. However, services inflation had been a significant headache for the rate setters and it dropped from 5% in November to 4.4% in December, opening a window for today’s cut.

"The MPC’s decision also reflected sliding UK business confidence in the wake of the October budget, and surveys suggesting employers are poised to lay off workers. The UK economy appears to be at or near stagnation, and in dire need of the boost lower interest rates could provide. There is also the uncertainty surrounding the looming trade war set in motion by US tariffs.

"For savers, it is likely to depress the interest rate they can expect on their cash savings. And markets are pricing in another two rate cuts for the remainder of the year.

"The best way to shield yourself from the impact of shifts in interest rates is to build resilience in your day-to-day finances. That means having a financial cushion, invested prudently, that can help you weather external shocks."