Base Rate Held at 4% – What It Means and When It Might Change
The Bank of England has kept the base rate at 4%. This decision affects mortgages, savings, and the wider economy. The rate is what the central bank charges other lenders when they borrow funds, influencing both borrowing costs for consumers and returns for savers.
The Bank uses the base rate as a primary tool to control inflation, which measures how rapidly prices rise. The Government’s target for Consumer Prices Index (CPI) inflation is 2%.
Current Inflation and MPC Decision
Recent data shows that CPI inflation stood at 3.8% for the 12 months to September, unchanged from August but remaining above the target. The Bank’s Monetary Policy Committee (MPC) voted as follows:
- Five members voted to keep the 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."
Expert Commentary
"The Bank of England has chosen patience. Inflation is falling faster than expected, wage growth easing, and the labour market clearly softening."
According to Nicholas Mendes of broker John Charcol, the central bank’s cautious stance reflects its focus on gathering more data before adjusting rates further.
Summary
The Bank of England kept rates steady to balance inflation risks with slowing economic growth, signaling a watchful approach to future adjustments.