The Bank of England voted to hold its key interest rate at 4% on November 6, 2025, in one of the closest decisions in recent memory. According to CNBC, five members of the nine-member Monetary Policy Committee voted to maintain rates. Four members opted for a 25 basis point cut to 3.75%. The split was tighter than economists anticipated, with Reuters polls predicting a 6-3 division favoring a hold.

Bloomberg reports that Governor Andrew Bailey cast the deciding vote to keep rates unchanged. The central bank stated that September's inflation rate of 3.8% had likely peaked. A disinflationary trend was underway, supported by the still restrictive monetary policy stance. This reflected an easing of pay growth and services price inflation.

The decision came just weeks before the government's Autumn Budget scheduled for November 26. Economists had characterized this meeting as one of the hardest to predict in some time. The uncertainty stemmed from conflicting economic data showing cooling inflation alongside weakening growth.

Why This Decision Matters for UK Households and Businesses

The rate hold directly affects millions of UK households and businesses facing borrowing costs. Mortgage holders with variable rates will not see immediate relief from monthly payments. Savers, however, will continue to earn higher returns on deposits compared to the ultralow rate environment of recent years.

The Bank of England's official statement noted that progress on underlying disinflation continues. The committee balanced risks around meeting the 2% inflation target sustainably. The risk from greater inflation persistence has become less pronounced recently. Meanwhile, the risk to medium-term inflation from weaker demand has become more apparent.

Governor Bailey explained his vote in the minutes. He stated that upside risks to inflation have become less pressing since August. He sees further policy easing ahead if disinflation becomes more clearly established. Recent evidence points to building slack in the economy, and the latest CPI data were promising. However, this represents just one month of data. Labour costs remain elevated and wage growth may plateau despite its recent downward path.

Global Context Shows Diverging Central Bank Strategies

The Bank of England's cautious approach contrasts with actions by other major central banks in 2025. U.S. Bank analysis shows that the European Central Bank has cut rates more aggressively. The ECB's main interest rate peaked at 4% in 2023 but now stands at 2.0%. The BOE raised rates to 5.25% in 2023, initiated cuts in August 2024, and currently maintains rates at 4%.

The Federal Reserve held its rate at 4.50% until mid-September 2025, when it cut by 0.25%. Chief economist Beth Ann Bovino at U.S. Bank noted an unusual pattern this cycle. The Fed delayed rate cuts while other central banks moved first. This reverses the typical sequence where the Fed leads global monetary policy shifts.

Market observers expect the Bank of England to resume cuts in December or February 2026. Forecasts suggest at least two 25 basis point reductions next year, bringing rates to 3.50%. A potential third cut in 2026 could lower rates to 3.25%, depending on fiscal policy outcomes.

The UK faces unique challenges among major economies. British consumer price inflation remains the highest among advanced economies at 3.8%. This results partly from one-off factors including April's rise in employer social security charges. The unemployment rate has risen to 4.7% in July 2025 from 3.6% in 2022.

Further Reading

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