London – The Bank of England has decided to hold its key interest rate at 4%, maintaining its cautious stance as policymakers weigh the risks of persistent inflation against signs of a slowing economy.
The announcement followed the latest meeting of the Monetary Policy Committee (MPC), where officials agreed that more time was needed to assess whether inflationary pressures are easing sufficiently before moving on rate cuts.
Inflation Still a Worry
While headline inflation has cooled from last year’s highs, policymakers remain concerned about what they describe as “persistent pressures” in areas such as services and wages. Catherine Mann, a member of the MPC, warned this week that the UK faces a “high persistence scenario,” making it dangerous to assume inflation will fall quickly.
“Price growth in services and continued wage increases suggest inflation risks remain sticky,” Mann told reporters, urging vigilance before loosening monetary policy.
Calls for Caution on Growth
Others within the Bank struck a more cautious tone. Deputy Governor Sarah Breeden said holding rates too high for too long could undermine growth, output, and employment. “The risk is not just inflation,” she said, “but also the damage to the real economy if monetary policy remains too tight.”
This difference in emphasis highlights a growing split within the MPC over how quickly to move toward easing.
Markets React
Financial markets had largely anticipated the decision, but investors remain focused on the pace of future cuts. Some economists expect the Bank may begin trimming rates before the end of the year if inflation continues to retreat.
Meanwhile, the Bank confirmed it would slow its program of quantitative tightening, reducing the pace at which it sells government bonds back into the market.
Wider Implications
The BoE’s cautious stance contrasts with some other central banks, such as the U.S. Federal Reserve, which is also grappling with the timing of its first cuts. Analysts say the outcome underscores the global balancing act: ensuring inflation doesn’t resurface, while avoiding an overcorrection that chokes growth.
The Bottom Line
For now, UK households and businesses will continue facing borrowing costs at their highest in years. But the debate within the Bank makes clear that policymakers are preparing for a turning point — one that could reshape the economic outlook heading into 2026.
