Bank of England holds rates at 4%

The Bank of England has opted to hold its base interest rate at 4% following a narrow 5–4 vote within the Monetary Policy Committee (MPC), revealing a deepening split among policymakers. Despite growing signs of a slowing economy, persistent inflation and fiscal uncertainty have prompted the Bank to maintain its cautious stance - at least for now.

A Divided Decision Reflecting Economic Crosswinds

The decision came against a backdrop of slowing wage growth, easing inflation, and cooling consumer demand. September’s inflation came in at 3.8%, lower than expected, yet still nearly double the Bank’s 2% target. Economists and market watchers now anticipate that December’s meeting could deliver the first rate cut in over a year, as the economy shows increasing signs of strain.

Nigel Green, CEO of deVere Group, noted that the debate is now shifting rapidly toward “when the first cut comes.” He warned that maintaining the current rate risks pushing the economy into a deeper slowdown just as fiscal tightening looms. “Inflation is yesterday’s fight,” he added. “The challenge now is sustaining growth without reigniting price pressures.”

Business Sector Cautions Against Prolonged Tightening

Across the business community, reactions reflected both disappointment and cautious optimism. Many firms had hoped for an early easing of borrowing costs to unlock investment and confidence ahead of the Chancellor’s Autumn Budget.

Neil Rudge, Chief Banking Officer at Shawbrook, said the hold would “disappoint UK SMEs” expecting a pivot toward easing. He emphasized the need for government action to boost business confidence: “The Budget must send a clear signal that business investment and access to finance are firmly back on the government’s agenda.”

Similarly, Mike Randall, CEO of Simply Asset Finance, warned that businesses “need to see the cost burden fall further and conditions genuinely improve.” While stability provides reassurance, he said, “The right measures could unlock growth and reinforce ambition across the UK; the wrong ones risk stalling momentum at a critical moment.”

Consumers and Borrowers Seeking Stability

For borrowers - particularly older ones and households already under pressure - stability is welcome, but relief remains elusive. Simon Webb, Managing Director of Capital Markets and Finance at LiveMore, said the Bank’s decision was “not unexpected considering the current economic climate,” but stressed that many older borrowers on fixed incomes require predictability to make long-term financial plans. He added that tax uncertainty, with Labour’s Rachel Reeves hinting at future increases, has added to consumer unease.

Andrew Gething of MorganAsh echoed those concerns, warning that “another hold keeps the pressure firmly on households.” He highlighted growing financial vulnerability and called for greater focus on consumer resilience and inclusion.

Housing and Lending Markets Show Tentative Optimism

In the mortgage and housing sectors, the hold was met with mixed reactions. John Phillips, CEO of Just Mortgages, described the Bank’s caution as understandable but said “there was certainly scope for a cut” given improving inflation data. Still, he noted encouraging signs: “There have been plenty of positive headlines coming out of the mortgage market with a drop in rates and cuts from lenders in all areas.”

Richard Pike of Phoebus Software also pointed to falling mortgage rates, now below 5%, as evidence that lenders are anticipating future cuts. “With one more MPC vote this year,” he said, “it remains to be seen whether the Bank will serve up an early Christmas present for the market.”

Looking Ahead: December Decision Looms Large

With global central banks such as the Federal Reserve and European Central Bank signalling potential easing, the Bank of England faces mounting pressure to follow suit. A December rate cut is now widely seen as both possible and necessary to prevent further drag on growth.

For now, the decision to hold has offered neither surprise nor significant relief. As the data continues to soften and the Budget approaches, attention turns to whether the Bank will seize what Nigel Green described as “a window of opportunity in December to start rebalancing policy.”

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