The Bank of England has held interest rates at 4%.
In a move that was widely predicted by experts, the Monetary Policy Committee voted five to four in favour of a hold.
In a statement published with its interest rate decision, the Bank of England said “inflation is judged to have peaked”.
At a press conference, Bank of England governor Andrew Bailey said risks still remain though, with the Bank needing to see more evidence that inflation is falling before it can make further cuts to interest rates.
Reaction to interest rates held at 4%
David Bharier, head of research at the British Chambers of Commerce, said:
“With the Budget just weeks away, inflation well above target, and a continued uncertain economic backdrop – today’s rate hold at 4% was unsurprising. The decision was anticipated by the BCC’s latest forecast, which also expects no further cuts in 2025, and only gradual reductions through 2026.
“Although headline inflation eased slightly to 3.8% in September, firms are increasingly sounding the alarm about rising costs. The Bank references BCC data throughout today’s monetary report. In our latest survey of 4,600 firms across the UK, 57% reported concern about inflation – while 72% raised labour costs as a source of pressure to raise prices. For many, this is driven by rising taxation, and the expectation of more to come.
“Ahead of the Budget, the BCC’s message to the Chancellor is clear: no more tax rises on business. With interest rates only gradually coming down, Government must urgently focus on growth through boosting exports, tackling the skills crisis, and accelerating infrastructure project delivery. November 26th will be make-or-break for business investment and confidence.”
Anna Leach, chief economist at the Institute of Directors, said:
“The MPC voted once again to hold Bank Rate at 4%, but with a narrower 5-4 split this time, reflecting the tight balance of risks.
”For the doves, stronger disinflationary pressures and downside risks dominated, amidst concerns over the outlook for consumption. Meanwhile the hawks are worried about inflation persistence and second-round effects. Although the Governor voted for a hold this time, he made it clear that this was mainly to await more evidence of disinflation.
“It’s odds-on for a rate cut in December, provided inflation continues to track down – and the Bank think it will, projecting CPI at 3.6% for October. Even a deftly designed Budget will unleash a sizeable fiscal consolidation, pushing down further on demand and price pressures. A pre-Christmas rate cut would be welcome news for businesses and consumers.”
Neil Rudge, chief banking officer, Commercial at Shawbrook, said:
“Holding rates steady for a third straight month will disappoint UK SMEs, many of
whom had expected a shift towards easing after inflation fell faster than forecast.
“With borrowing costs still at their highest level in over a decade, confidence
remains fragile and investment cautious.
“The Budget must send a clear signal that business investment and access to
finance are firmly back on the government’s agenda. It presents an opportunity to give UK SMEs real support. Measures that could help include reforms to business rates, steps to improve access to finance, easing regulatory and reporting burdens, and incentives to encourage investment such as enhanced
capital allowances. Taken together, these actions would give businesses both the
space and the confidence to invest, grow, and create jobs.”
David Aikman, COO at Azets UK, said:
“Interest continues to hold around the 4% mark which, while far from ideal, does spare businesses a further cost-related headache during an already tough trading climate. The chancellor’s challenge is now to create conditions for sustained growth without reigniting inflationary pressures that will increase it again and, in doing so, increase the pressure on businesses. All this, just as firms hope for a stronger year end after a tough 12 months with rising wage bills, increasing costs and cashflow challenges.”