The Bank of England held interest rates with 4 percent and stopped its cycle of monetary relaxation in inflation when governor Andrew Bailey warned that Britain was not yet “out of the forest”.
The decision that the bank’s nine -member money committee (MPC) made by the bank voted seven members to leave the interest rates unchanged, while two supported a quarter -point shortening. The result agreed with the market expectations, whereby investors bet on the fact that interest rates for the rest of 2025 will remain 4 percent.
In addition to the interest decision, the central bank announced that it would slow down the pace of sales of government bonds. In the next 12 months, it will reduce its balance by £ 70 billion – after £ 100 billion in last year – by a mixture of gilded sales and terms. The bank said that the move had been designed “to minimize the effects on the market conditions” after long-term debt in Great Britain at the highest level had increased at the highest level for almost three decades.
Bailey said the decision to adapt the pace of bond votes was “to better reflect the demand conditions”. The bond returns and the prices are reversed, and the markets were nervous after the edition of record supply in September.
The break takes place after the Office for National Statistics (ONS) confirmed this week that inflation kept stable at 3.8 percent in August, the highest level since the beginning of 2024 and almost twice the bank. The inflation of services, an important level for domestic price pressure, rose to 5 percent.
Food prices and higher employment costs, which were cited with Chancellor Rachel Reeves in the amount of £ 25 billion to the national insurance company for companies in the amount of 25 billion GBP, was probably increased by the bank as inflation in September and forecast a reading of 4 percent.
Despite five interest rate cuts since August 2024, the bank emphasized that the “monetary policy was not on a preset path” and promised a “step -by -step and careful” approach for further reductions.
Bailey added: “While inflation will probably decrease in the coming years, we are not yet out of the forest, so that future cuts have to be gradually and carefully carried out.”
The British economy has shown little momentum in recent months. According to the ONS, GDP rose flat in July in July, while unemployment rose to a four -year high of 4.7 percent. The bank also warned that geopolitical risks – including Donald Trump’s trade tariffs and the wars in Ukraine and Gaza – could continue to weigh up the global economy.
Economic growth “remained damped”, the MPC declaration said, in which concerns have been emphasized that workers who demand higher wages, and companies that could increase prices that could hold inflation.
The two members who voted for a cut – Swati Dhingra and Alan Taylor, both external members – argued that a reduction was necessary to compensate for the growing recession risks.
The markets reacted calmly to the decision. The return on 10-year-old gold-plated Gilts held 4.62 percent, while the 30-year-old gilded return rose to 5.42 percent. Sterling rose briefly opposite the dollar, but ended with $ 1.369 flat, while the euro acted with 86.72 pence. The FTSE 100 and MID-CAP FTSE 250 both rose by 0.3 percent.
The next step of the bank depends heavily on the inflation data, which is on the rise in the budget of the Chancellor Reeves on November 26th. This is expected to control up to £ 40 billion and expenditure.
