Bank of England holds interest rates at 4% amid concerns over inflation

"Bank of England policymakers have left interest rates on hold at 4% amid concerns about persistent above-target inflation. The central bank's nine-member monetary policy committee (MPC) voted 7-2 to leave borrowing costs unchanged, after five cuts since summer 2024, including a reduction last month. The governor, Andrew Bailey, said: We held interest rates at 4% today. Although we expect inflation to return to our 2% target, we're not out of the woods yet so any future cuts will need to be made gradually and carefully."

"The MPC had been widely expected to pause rate cuts this month, with annual inflation running well above the Bank's 2% target, at 3.8% in August. Policymakers have been balancing the risks of rising inflation caused in part by a jump in food prices against a continuing slowdown in the jobs market, with unemployment at a four-year high. In the minutes of Thursday's meeting, the MPC said its own estimates showed employment growth at zero."

"Reeves's 25bn NICs increase at last year's budget sparked a furious backlash from business groups. Two members of the committee, Swati Dhingra and Prof Alan Taylor, voted for another quarter point rate cut this month. The MPC's decision to hold rates widens the gulf between its stance and the US Federal Reserve, which reduced interest rates by a quarter of a percentage point on Wednesday, its first rate cut since December."

The nine-member monetary policy committee voted 7-2 to leave borrowing costs at 4% after five cuts since summer 2024. Annual inflation stood at 3.8% in August, well above the 2% target, prompting caution about further reductions. Policymakers weighed rising inflation pressures, partly from higher food prices, against a slowing labour market and unemployment at a four-year high. The MPC's own estimates indicated employment growth at zero, partly linked to higher employers' national insurance contributions. Two members preferred an additional quarter-point cut. The decision creates a divergence with the US Federal Reserve, which recently cut rates.

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