Bank of England keeps key rate at 4 pct ahead of Budget

LONDON -- The Bank of England (BoE) has maintained its benchmark interest rate unchanged at 4 percent ahead of the Budget due in late November, amid persistently high inflation, according to a statement released Thursday by Britain's central bank.

At its meeting ending Wednesday, the BoE's Monetary Policy Committee (MPC) voted five to four to hold the rate, with four members favoring a 0.25 percentage point cut to 3.75 percent.

The BoE stated that CPI inflation is believed to have peaked. The committee said the risks are now comparatively balanced, noting that the services price growth had eased and that the impacts of headline inflation on domestic inflationary pressures had also subsided.

Britain's CPI rose 3.8 percent year-on-year in September 2025, almost double the BoE's 2 percent target. Inflation in September, August, and July hit an alarming high level since January 2024, when the rate stood at 4 percent, according to the Office for National Statistics.

The bank said any further rate cuts will depend on the evolution of the inflation outlook. "If progress on disinflation continues, Bank Rate is likely to continue on a gradual downward path," it added.

"With the Budget just weeks away, inflation well above target, and a continued uncertain economic backdrop, today's rate hold at 4 percent was unsurprising," said David Bharier, head of research at the British Chambers of Commerce (BCC). He noted that the decision was anticipated by the BCC's latest forecast, which also expects no further cuts in 2025, and only gradual reductions through 2026.

Firms have been complaining about rising costs, Bharier said, noting that in BCC's latest survey of 4,600 firms across Britain, 57 percent reported concern about inflation, while 72 percent raised labor costs - contributing to ongoing inflation pressure. He emphasized that the upcoming Budget will be "make-or-break" for business investment and confidence.

In early August, the BoE cut its benchmark rate from 4.25 percent to 4 percent, the lowest level in more than two years, in an effort to support the country's weakening economy. The next monetary policy meeting is scheduled for Dec. 18.