18.09.2025 16:20
The Bank of England (BoE) has opted to maintain its benchmark interest rate at 4%, a decision that comes amidst persistent concerns over inflation remaining significantly above target. This move, made by the central bank's nine-member Monetary Policy Committee (MPC), saw a decisive 7-2 vote to keep borrowing costs steady. This pause in rate adjustments follows a period of aggressive easing, which included five reductions since summer 2024, with the most recent cut occurring just last month.
Despite these prior reductions, the UK's inflationary environment continues to pose challenges, with August's inflation rate standing at 3.8%, substantially higher than the BoE's mandated 2% target. Core consumer price index (CPI) figures further underscore these pressures, registering an annual increase of 3.6%, a slight deceleration from July's 3.8%. The central bank explicitly highlighted its vigilance regarding the potential for this elevated inflation to fuel upward spirals in wage demands and price-setting mechanisms, underscoring that critical upside risks to medium-term inflationary expectations persist within the MPC's forward-looking assessments.
This decision to hold rates marks a shift from recent policy, aligning with broader market expectations for a pause, given the stubbornly high inflation figures. Policymakers are navigating a delicate economic landscape, endeavoring to counteract surging food prices that have significantly contributed to inflation over recent months, while simultaneously addressing a deteriorating job market, where unemployment has regrettably climbed to a four-year peak. This complex scenario demands a careful balancing act to stabilize the economy without stifling growth or exacerbating inflationary trends.
Addressing the situation, BoE Governor Andrew Bailey confirmed during a recent meeting that rates were indeed held at 4%, yet he reiterated the institution's steadfast commitment to guiding inflation back down to its 2% objective. He candidly acknowledged that the nation's economy has not yet reached its desired trajectory, emphasizing the necessity for any future rate adjustments to be executed with utmost gradualism and prudence. Bailey articulated the Committee's unwavering resolve to "squeeze out any existing or emerging persistent inflationary pressures, to return inflation sustainably to its 2% target in the medium term," a clear signal of the bank's primary focus in the period ahead.
