Despite some late momentum in the markets that the Bank of England (BoE) would announce a cut, the MPC has decided to keep the base rate at 4% in a close-run result by five votes to four.
While the most recent inflation print came in lower than expected and below the Bank’s forecast of 4%, it was still 3.8%, and almost double the Bank of England’s target.
While the central bank has been criticised for being too data dependent and not having enough of a strategic, forward-looking approach, it would have a huge pivot for them to decrease the base rate with inflation so high.
Given the BoE’s focus on a ‘gradual and careful’ approach to decreasing rates, it makes sense that it would want more evidence that the previous month’s halt in inflation isn’t a one-off.
Add in that with the Budget approaching soon, it’s likely that rate setters would have wanted more clarity over fiscal policy and the opportunity to assess the market reaction to the Budget before changing rates, it was natural for the markets to conclude that a cut was less than a 1 in 3 possibility.
Nevertheless, economic growth remains slow, and it’s part of the BoE dual mandate to protect and enhance financial stability as well as keep inflation in check. The latest reading from August showed just a 0.1% expansion.
While the MPC will have welcomed private sector wage growth slowing to its lowest level since 2021, there are concerns that this may be the start of a deterioration in the labour market.
Hiring rates have started to stall, with employers reviewing their employment plans as AI solutions have become more developed and widespread, the cost of labour has increased with rising employment taxes, the minimum wage has risen and access to immigrant labour is reducing.
Those economic concerns mean that if inflation does fall in line with expectations in the next print, then it’s very likely that there will be one further cut in December before the end of 2025.
Consumer Analysis
Today, we saw the Bank of England interest rate stay the same at 4%, in line with market expectations.
What does the latest BoE rate mean for your money?
Inflation – currently at 3.8% as of September 2025 – remains a concern for both the Bank of England and for people’s wallets. Everyday goods have continued to increase in price, especially food and clothing, alongside recent utility bill rises, people’s financial resilience is being challenged.
However, holding the base rate at 4% will be disappointing news for variable mortgage holders who will have been hoping for a rate cut to reduce their monthly outgoings. As for remortgagers, all is not lost as they’ve recently seen a slight drop in rates. For example, the average fixed rate for a two-year 75% LTV mortgage in October this year was 4.75%, which has recently dropped to 4.72%.
Meanwhile, savers can make the most of this hold in the base rate and continue to get inflation-beating returns on the money they set aside. The main high street banks have been slower to pass on increases in the base rate to customers so it’s important to explore other options – smaller banks, building societies, and fintechs are usually quicker to offer higher rates on savings accounts, including Cash ISAs.
Against a challenging economic background, people are looking for competitive interest rates for their cash savings with tax-free returns. Plum has recently extended its bonus offer to Cash ISA transfer-ins, so customers can get higher returns not just on Cash ISA deposits from this tax year, but transfers from previous years as well.
That’s all the more important with the Chancellor reportedly considering slashing the Cash ISA allowance in half. It’s also paramount that customers consider a range of options to secure better long-term returns for their money, especially if interest rates return to a downward trajectory, like a Stocks & Shares ISA.
