What's happened
The Bank of England kept interest rates at 4% amid signs inflation has peaked at 3.8%. The MPC voted 5-4 to hold rates, citing the need for more evidence before future cuts. The decision comes ahead of the November 26 UK budget, with inflation forecast to fall to 2% by 2027.
What's behind the headline?
The BoE's decision reflects a cautious approach amid mixed signals. The close 5-4 vote indicates division among policymakers, with some members worried about persistent inflation pressures and others emphasizing the need for more evidence of disinflation. The governor's emphasis on waiting for further data suggests that rate cuts are likely only in the near future, possibly in December. The market's pricing of a rate cut aligns with this cautious stance, but the political context—particularly the upcoming budget—adds complexity. If the fiscal measures slow demand further, the BoE may delay rate cuts, but if inflation continues to decline, a reduction to 3.75% or lower is probable. The broader economic outlook remains fragile, with unemployment rising and growth forecasted to slow, making the BoE's balancing act critical for stability. The decision underscores the importance of data-driven policy in a climate of political and economic uncertainty, with the potential for rate adjustments to influence currency strength and investor confidence.**
What the papers say
The Guardian reports that the BoE's MPC voted 5-4 to hold rates at 4%, with Governor Andrew Bailey emphasizing the need for more evidence before cutting. Reuters highlights the division within the MPC and the market's anticipation of a possible rate cut in December, influenced by upcoming economic data and the UK budget. Both sources agree that inflation has peaked at 3.8%, but differ slightly in their focus—The Guardian on the decision process and Reuters on market expectations and economic signals. The Guardian also notes the political considerations, such as the upcoming budget and the government's fiscal plans, which could impact future monetary policy. Reuters emphasizes the cautious tone of the MPC and the importance of waiting for further evidence, with some members concerned about inflation persistence and others about economic slowdown. Overall, the coverage underscores a cautious but optimistic outlook for inflation and growth, contingent on upcoming data and fiscal policy outcomes.
How we got here
The BoE has been balancing inflation control with economic slowdown concerns. Recent data shows inflation at 3.8%, the highest among G7 nations, but forecasts suggest it will decline as demand weakens. The upcoming UK budget, expected to include tax hikes, influences monetary policy expectations.
Go deeper
Common question
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Is UK Manufacturing Recovering After a Slowdown?
UK manufacturing has shown signs of a tentative rebound, but many questions remain about the sector's true health. With recent increases in activity and reopening of key plants, people are wondering if this is a lasting recovery or just a temporary boost. Below, we explore the current state of UK manufacturing, what factors are influencing its trajectory, and what experts are saying about its future.
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Why Did the Bank of England Keep Rates Steady?
The Bank of England decided to hold interest rates at 4% during its latest meeting, amid ongoing inflation concerns and signs of economic slowdown. This pause has sparked questions about the future direction of UK interest rates, inflation, and economic growth. Below, we explore the reasons behind this decision and what it could mean for borrowers, investors, and the economy as a whole.
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The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based.
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Rachel Jane Reeves is a British Labour Party politician serving as Shadow Chancellor of the Duchy of Lancaster and Shadow Minister for the Cabinet Office since 2020. She has been the Member of Parliament for Leeds West since 2010.
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Andrew Bailey may refer to:
Andrew Bailey (banker) (born 1959), British banker, Governor of the Bank of England
Andrew Bailey (baseball) (born 1984), American baseball pitcher and coach
Andrew Bailey (performance artist) (born 1947), British performance.
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Pound sterling, known in some contexts simply as the pound or sterling, is the official currency of the United Kingdom, Jersey, Guernsey, the Isle of Man, Gibraltar, South Georgia and the South Sandwich Islands, the British Antarctic Territory, and Trista
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In economics, inflation is a general rise in the price level of an economy over a period of time.
When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power
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The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom or Britain, is a sovereign country located off the northwestern coast of the European mainland.
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Monetary Policy Committee (MPC) may refer to:
Monetary Policy Committee (India) of the Reserve Bank of India
Monetary Policy Committee (United Kingdom) of the Bank of England
Monetary Policy Committee of the Central Bank of Brazil