The Bank of England (BoE) has decided to maintain its benchmark interest rate at 4% during its latest policy meeting on Thursday. The decision, made by the nine-member Monetary Policy Committee (MPC), was widely expected, though some analysts had speculated on a potential quarter-point reduction to 3.75%. The vote was notably close, with five members favoring no change and four supporting a rate cut. Governor Andrew Bailey emphasized the need for greater certainty that inflation is on a sustainable path toward the bank’s 2% target before considering further reductions. Currently, the annual consumer price inflation rate stands at 3.8%, nearly double the BoE’s target. The MPC noted in its meeting minutes that inflation has likely peaked at a lower level than previously forecasted in August, when the last rate cut was implemented. Economists anticipate that inflation will continue to decline in the coming months, potentially reaching the target by next year, which could pave the way for a rate cut at the December meeting. The upcoming UK budget announcement on November 26 is expected to play a pivotal role in shaping economic policy, with Treasury chief Rachel Reeves signaling potential tax increases aimed at reducing inflation and stabilizing the economy. Since initiating rate cuts in August 2024, the BoE has adopted a cautious approach, adjusting rates every three months. Thursday’s decision marks the first time the bank has opted against a rate cut within this quarterly framework. Meanwhile, the US Federal Reserve recently reduced its key interest rate for the second time this year, though Chair Jerome Powell cautioned that further cuts are not guaranteed, citing economic uncertainties and internal divisions among policymakers.
Divided Bank of England holds key interest rate at 4% despite hopes inflation has peaked
