Bank of England expected to hold rate at 4% as inflation remains above target

The Bank of England is widely expected to hold its Bank Rate at 4% when policymakers meet on Thursday, ending speculation that it might cut further this year. The decision to set the rate at 4% would keep borrowing costs and savers’ returns steady after the MPC cut the Bank Rate from 4.25% to 4% at its last meeting in August, bringing the rate to its lowest level in more than two years. The decision is due to be announced at 12:00 BST. Wednesday’s official data showed prices rising at nearly twice the 2% target, driven by higher food costs, with the inflation rate remaining at 3.8% in August. The Bank Rate remains the MPC’s principal tool for controlling inflation, with higher borrowing costs intended to cool demand but risking slower growth.

Analysts expect Thursday’s vote to be more straightforward, with little to no change on the near-term path. The August decision was taken after an unprecedented second vote by the nine MPC members, a move Governor Andrew Bailey said was “finely balanced.” Given the still-elevated inflation print, most policymakers are unlikely to risk cutting rates further this year, even as some forecasters anticipate inflation could drift lower in the months ahead. The Bank Rate’s trajectory remains a central influence on the housing market, with lenders tying their own mortgage offers to the level set by the Bank.

The Bank’s rate is a key lever for the economy: when it moves, mortgage pricing and lender pricing components shift in tandem, and resets on new fixed-rate loans can be affected for years. Market commentary has suggested that while mortgage rates have edged down slightly since August, further moves are uncertain, with a broad range of outcomes depending on inflation data and global policy developments. Rachel Springall of Moneyfacts cautioned that savers have faced a downward drift in returns during the period when the Bank has been lowering the Bank Rate, and she urged savers to act if their current accounts no longer offer a decent return. She noted that the budget cycle could influence expectations for the Bank’s next moves and the fate of household finances.

Global developments add context to Thursday’s decision. The U.S. Federal Reserve cut interest rates to a range of 4% to 4.25% for the first time since December, signaling a shift in the global rate landscape that could influence investors’ expectations for the Bank of England’s path. The European Central Bank, meanwhile, held its rate at 2%. Policymakers around the world are balancing the push to support growth against the ongoing risk that inflation could re-accelerate if demand remains too strong. The Resolution Foundation, a think-tank focused on lower- and middle-income households, said living standards would need relief after what it described as a “lost” 20 years of growth, a sentiment that adds to the political sensitivity around any policy shift.

As Thursday nears, market watchers will be parsing how global rate moves, domestic inflation data, and fiscal signals interact with the Bank’s own assessment of the economy. While most expect no immediate move from the MPC, the door remains open for future adjustments if inflation behaves differently than projected and if growth falters. The Bank’s decision, due at noon, will set the tone for homeowners and savers alike as households prepare for the end of the summer and the approach of year-end budgeting.