BoE Holds Rates at 4% as Inflation Hits 3.8% Target

- Bank of England holds interest rates at 4% amid inflation concerns. - Governor Andrew Bailey urges caution on premature rate cuts. On September 18, 2025, the Bank of England announced it will maintain the UK’s base interest rate at 4%. The Monetary Policy Committee (MPC) reached this decision with a 7-2 vote, as two members advocated for a 0.25 percentage point reduction while the majority supported keeping rates steady. This decision comes amid persistent inflationary pressures. On September 17, 2025, the Office for National Statistics reported that the Consumer Prices Index (CPI) remained at 3.8% in the 12 months to August. This figure is well above the central bank’s 2% target, and MPC members hinted that inflation might rise slightly in September before gradually declining toward the target throughout 2026. On September 18, Bank Governor Andrew Bailey said in a statement, “Although we expect inflation to return to our 2% target, we’re not out of the woods yet, so any future cuts will need to be made gradually and carefully.” This cautious tone reflects concerns over inflation’s persistence amid broader economic challenges, including the UK’s cooling labor market. Underscoring these vulnerabilities, Sky News reported on September 18 that unemployment has reached a four-year high. In addition, fiscal policy will influence the UK’s economic outlook, as Chancellor Rachel Reeves is set to unveil tax increases in the Autumn Budget on November 26, 2025. On September 17, The Express reported that these measures, which aim to stabilize public finances amid weak productivity growth and mounting pressures on public services, could also interact with monetary policy to shape market dynamics.