The Bank of England (BoE) has decided to maintain the country’s benchmark interest rate at 4 percent, citing lingering inflationary risks and a need for cautious monetary easing despite recent economic progress.
The Monetary Policy Committee (MPC) of the BoE voted by a 7–2 majority on Thursday to keep the rate unchanged. Two members voted in favour of a 0.25 percentage point cut to 3.75%, but the majority opted for a hold strategy.
“There has been substantial disinflation over the past two and a half years… but we remain focused on ensuring inflation returns sustainably to the 2% target,” the bank said in a statement.
While acknowledging a sharp decline in inflation following global supply chain disruptions and previous monetary tightening, the BoE said it is not yet ready to lower borrowing costs.
The bank’s assessment noted:
- Pay growth, while falling, remains elevated
- Services inflation has plateaued
- UK GDP growth continues to be subdued, with labour market loosening gradually
The bank warned that a temporary spike in inflation could reignite pressure on wages and prices, and that domestic and geopolitical risks remain significant.
Alongside its rate decision, the BoE announced a slower pace of bond sales, adjusting its quantitative tightening programme. These assets were largely accumulated during past economic shocks such as the 2008 global financial crisis and the COVID-19 pandemic.
“We are not out of the woods yet, so any future cuts will need to be made gradually and carefully,” said Andrew Bailey, Governor of the Bank of England.
In Contrast, US Federal Reserve Cuts Rates to 4%
Meanwhile, the US Federal Reserve took a different path, cutting its benchmark interest rate by 0.25 percentage points to 4 percent on September 17, its first reduction since December 2024.
Fed Chair Jerome Powell told reporters that while inflation has eased, the risks to employment have become more prominent.
“The balance of risks has shifted toward the employment side of the Fed’s mandate,” Powell said, noting that future cuts are probable but not guaranteed.
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