The Bank of England held rates at 4% ahead of Chancellor Rachel Reeves’ Budget speech. Inflation is expected to not reach 4%, with the pound softening and FTSE 100 gaining. The decision was 5-4 in favor of holding rates, with ongoing concerns over inflation and waiting on data. The next focus is the December BOE meeting, where rates could be cut.

Experts are divided on a potential fourth rate cut in December. Rising unemployment and weakening payrolled employee data suggest a need for further easing. The Bank predicts CPI to fall to 3.2% by March 2026, with inflation hitting target in 2027. A final rate reduction of 25 basis points is expected in December.

Since 2024, the Bank of England has cut rates three times in 2025, totaling four cuts in a year. The last decision before the Autumn Budget signals caution amid rising prices and low economic growth. Market expectations are for a rate cut in December, with traders anticipating further cuts in 2026. Fiscal policy tightening and slowing household income growth may prompt future rate cuts. Five members of the MPC voted to keep rates at 4%, while four wanted a cut before the Autumn Budget in 2025. The focus now shifts to the December BOE meeting, where interest rates may be reduced. A potential income tax hike could further strain households’ finances amid rising inflation and sluggish pay growth. This could lead to easing demand and lower inflation in the future. The possibility of two interest rate cuts in 2026 to 3.50% and a potential third cut to 3.25% is being considered based on fiscal tightening measures.

Read more at Morningstar UK

Five members of the Monetary Policy Committee voted to hold rates at 4%, while four voted for a quarter-point cut. This was the last Bank of England meeting before the 2025 Autumn Budget. The markets will now be looking towards the December BOE meeting, where interest rates could potentially be cut.: Bank of England Holds Interest Rates as Rachel Reeves’ Autumn Budget Looms