Bank of England holds 4% rate as inflation remains above target

The Bank of England kept its main interest rate at 4% on Thursday, as inflation in the United Kingdom remained well above the 2% target and August’s price data showed inflation at 3.8% year over year.

London policymakers announced the decision in a context of a gradual unwind of the spike in inflation that followed Russia’s invasion of Ukraine. Since August 2024, the Bank has been trimming borrowing costs in quarterly steps, aiming to normalize policy without reigniting price pressures.

Economists remain divided over whether another rate cut is on the horizon for the November meeting. If the easing path continues, a further reduction could be on the table, but inflation has proven stickier than expected, helped by comparatively strong wage growth.

The hold underscores the central bank’s balancing act between supporting growth and containing inflation, especially as services prices and wages continue to influence the inflation trajectory.

Markets have priced in a gradual path for policy, with the Bank signaling patience as it monitors incoming data and the lagged effects of prior rate reductions. The next decision is due in November, when policymakers will again assess whether additional easing is warranted given the risk that inflation stays above target.