Base rate held at 4% – what it means and when it might change
The Bank of England has decided to maintain the base rate at 4%. This rate affects what borrowers pay for loans and what savers earn on deposits, as it determines how much banks and lenders are charged when they borrow from the central bank.
The base rate also serves as a key tool the Bank uses to manage inflation — the pace at which prices increase. The Government has set a 2% target for the Consumer Prices Index (CPI), but the latest data shows inflation at 3.8% over the twelve months to September, unchanged from August and still above target.
Monetary Policy Committee vote
- Five members voted to keep the base rate at 4%.
- Four members voted to reduce it to 3.75%.
“The risk from greater inflation persistence has become less pronounced recently, and the risk to medium-term inflation from weaker demand more apparent. But more evidence is needed on both.”
The committee highlighted that inflation pressures are easing but further data is necessary before any change is made.
Expert commentary
“The Bank of England has chosen patience. Inflation is falling faster than expected, wage growth easing, and the labour market clearly softening.”
— Nicholas Mendes, broker at John Charcol
Outlook
While inflation is gradually moving down and economic conditions are slowing, the Bank of England appears cautious, signaling that rate cuts could still be some time away.
Author’s summary: The Bank of England kept its base rate steady at 4%, reflecting cautious optimism as inflation falls but remains above target.