The Bank of England has opted to hold its base interest rate at 4 per cent for the seventh consecutive time, signalling a cautious approach as inflation continues to edge closer to the Government’s 2 per cent target.
The decision, announced by the Bank’s Monetary Policy Committee (MPC) on Thursday, was widely expected by economists, who noted that while the UK economy remains fragile, there are early indications that price pressures are starting to ease.
The MPC voted by a majority to maintain the rate, with policymakers highlighting the need to balance slowing inflation against the risk of stifling growth.
Speaking to The Guardian, Ruth Gregory, deputy chief UK economist at Capital Economics, said the move “underlines the Bank’s desire to see more definitive progress on inflation before signalling a rate cut.” She added that the Bank is “walking a fine line between ensuring price stability and preventing a deeper slowdown in consumer spending and investment.”
In comments to The Financial Times, economist Samuel Tombs of Pantheon Macroeconomics said the Bank’s stance “reflects growing confidence that inflationary pressures are easing,” but cautioned that “premature rate cuts could risk undoing much of the progress made over the past year.”
The decision to hold the rate follows a period of relative economic stability, with inflation now sitting at 2.3 per cent, the lowest level since mid-2021. However, households and businesses continue to face high borrowing costs, particularly in the mortgage and small business lending markets.
Governor Andrew Bailey said the Bank would continue to monitor wage growth and service sector inflation closely before making any adjustments. Economists expect the first rate cut to come in the first half of 2026 if inflation continues its downward trajectory.
The Bank’s decision comes amid mixed signals from global markets, with the US Federal Reserve and European Central Bank also holding rates steady this month.
Industry Experts Comments
Isaac Stell, Investment Manager at Wealth Club said:
“The Bank of England has held interest rates at 4.0% in November, as the MPC remains sat on the sidelines whilst they await the highly anticipated tax raiding budget.
For the first time, each member has had their views set out individually. These views show the lines in the sand between those advocating for a cut, who are clearly more concerned about a slowing economy, and those who see upside risks to inflation as the greater threat.
The reality is, both arguments have merits. CPI remains stuck at 3.8%, twice the banks target. However, wage growth and the labour market appear to be softening, whilst GDP growth remains anaemic. What’s more, many of the key drivers of inflation appear to be of the government’s own making, such as the rise in employers NICs, the employment rights bill, and the higher minimum wage. With an economy struggling to find second gear, the conditions for a cut are starting to line up.
By keeping rates unchanged in the weeks leading up to the budget, the BoE appears reluctant to let the government off the hook for fiscal responsibility. In her pre-budget speech, the Chancellor all but confirmed that taxes will have to rise. This fiscal tightening will likely do the heavy lifting for the BoE when it comes to fighting inflation, although perversely the previous Budget both tightened fiscal policy and increased inflation, Reeve’s will be reluctant to make that same mistake twice. This should give the BoE sufficient cover to console a beleaguered UK consumer in the form of a pre-Christmas rate cut.”
Luke Bartholomew, Deputy Chief Economist, at Aberdeen said;
“Over the last few weeks, speculation had been growing that the Bank of England might cut interest rates today. But a decision to keep rates on hold was always more likely than not and clearly the decision was very close. With inflation and wage growth moderating, and the budget likely to deliver tax increases, a cut in December looks increasingly likely. We think interest rates will then come down further through next year as well.”
Professor Joe Nellis is economic adviser at MHA, the accountancy and advisory firm:
“The Monetary Policy Committee (MPC) has chosen to keep interest rates at 4%, maintaining its firm and cautious stance as inflation remains well above the 2% target.
Given that inflation has held at 3.8% for three consecutive months and underlying domestic pressures — particularly in wages and services — have yet to ease decisively, this is a wise decision from the MPC. While inflation is far below the October 2022 peak of 11.1%, policymakers remain cautious about loosening too soon and risking a renewed rise in prices.
However, should headline inflation begin to cool ahead of the MPC’s meeting on 18th December, there’s a chance that the gift of an interest rate cut could be placed under the tree just in time for Christmas.
The broader economy shows little momentum. Growth is flat, business investment is subdued, and household confidence remains weak after an extended period of high borrowing costs and limited real wage growth. This combination of easing inflation and weak demand leaves the UK in a delicate position — stable, but without clear signs of recovery.
Attention now shifts to the Autumn Budget, which is set to play a crucial role in shaping the near-term outlook. With monetary policy effectively on hold, the government faces calls to use fiscal policy to stimulate growth, attract investment, and support productivity, while avoiding measures that could reignite inflation or undermine market confidence. UK gilts now sit at one of their lowest levels this year, and the Chancellor will be keen to maintain this.
For businesses, the environment remains testing. Credit conditions are tight, and cost pressures persist, even as energy prices fall. The path ahead will depend on whether fiscal and monetary policies can align effectively to stabilise prices, encourage investment, and lift economic momentum into 2026.”
Kevin Brown, savings expert at Scottish Friendly, has commented on the Bank of England’s decision to hold rates:
“The Bank of England’s (BoE) decision to hold rates today shows it is still treading carefully despite inflation coming in flat in August. That said, a Christmas rate cut now looks likely, with markets pricing in a strong chance of a 25 basis point cut next month.
“However, we don’t believe that will result in an opening of the floodgates – memories of double-digit inflation are still fresh, and the BoE will want to avoid reigniting price pressures.
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“For borrowers, a hold may sound disappointing, but they have benefitted from lower borrowing costs in recent weeks thanks to a price war among High Street lenders.
“As for savers, today’s decision only brings temporary relief. Savings rates have been drifting down and will likely fall further if the BoE acts next month, so shopping around remains essential.
“Over the long term though, investing provides the greatest potential to outpace inflation. If the Chancellor proceeds with plans to reduce the annual Cash ISA allowance, we expect more savers to look to the stock market – a move that would not only support their own returns but also help fund growth in UK businesses.”
