Bank of England Holds Rates at 4% Amid Ongoing Inflation Worries
The Bank of England has decided to hold interest rates steady at 4%, a move that many economists had anticipated. This is the lowest level rates have been since February 2023, and although some had wondered if another cut might be on the cards, the Bank’s Monetary Policy Committee opted for caution. By a clear majority of seven votes to two, the decision was made to keep things as they are.
The reasoning is straightforward: inflation remains stubbornly high. Official figures showed that prices are still rising at around 3.8% annually—almost double the Bank’s long-term target of 2%. And while that is lower than last year’s peaks, it’s still not enough to allow the Bank to relax. As Governor Andrew Bailey put it, the UK is “not out of the woods yet.” That phrase is a reminder that, although progress has been made, the cost of living pressures are still biting for many households.
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So, what does this actually mean for people day to day? For those on fixed-rate mortgages, nothing changes immediately. But for people on tracker mortgages, or anyone coming off a fixed deal, the decision will matter. A rate hold means borrowing costs won’t rise further for now, which brings a bit of stability. On the flip side, savers may not see much improvement either, as savings rates tend to follow the direction of the Bank rate.
There’s also a political dimension. Government ministers have been relatively quiet, though Conservative voices have pointed to what they describe as “deep nervousness” about the broader economic picture—sluggish growth, job losses, and the steady drumbeat of difficult headlines. The Bank itself has been careful to avoid committing to when it might cut rates again. Instead, it has signalled that any future reductions will be made “gradually and carefully.”
Alongside the rate decision, the Bank also announced that it will reduce the government debt it holds at a slower pace. This move is aimed at easing some of the pressure on financial markets, particularly with the Chancellor preparing her autumn Budget. At present, Britain’s debt pile remains enormous, and servicing it is becoming more costly.
The pound slipped slightly after the announcement, but only by a fraction. That tells us that the decision was already baked into market expectations. What investors, homeowners, and savers alike are really waiting for is clarity on when inflation will finally cool back to target. Until then, the Bank of England appears determined to keep its cautious stance, balancing the need to support growth with the risk of letting prices spiral again.
In short, today’s message was clear: the rate stays at 4%, inflation is still too high, and patience is needed. The path forward will be steady, measured, and anything but rushed.
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