The Bank of England kept interest rates unchanged at 4% in a narrow 5–4 vote, signaling that the first rate cut could come in December.
Governor Andrew Bailey backed holding rates but hinted he was close to supporting a reduction, citing easing inflation pressures.
Inflation reached 3.8% in September, which the bank believes is the peak, and is projected to fall to 3.1% next year and reach the 2% target by 2027. The BoE also raised its 2025 growth forecast to 1.5%, though unemployment is expected to rise to 5.1%.
The decision reflects a shift in focus from inflation to weak demand, as the economy shows signs of slowing. The move precedes Chancellor of the Exchequer Rachel Reeves’s upcoming budget, which may include tax increases that could further cool inflation.
At 4%, UK rates remain among the highest in the G7, but markets expect a gradual easing cycle to start next month if inflation continues to recede.
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