On Thursday, the Bank of England left its benchmark rate at 4.00%, in line with market expectations, pausing the once-per-quarter easing rhythm seen since August 2024. The Committee sought a balance between stubborn inflation and the recent softening in wage and unemployment data.

The vote split showed five members favoring no change and four favoring a cut. With a narrow margin, the BoE kept rates at 4%, laying the groundwork for a potential cut in December.

Governor Andrew Bailey cast the decisive vote, while four members called for a 25-basis-point cut to 3.75%. The BoE said September’s 3.8% inflation rate likely marked the peak.

Minutes indicated that among those voting to hold, Bailey was the most dovish, leaning toward a cut and arguing that inflation risks have recently diminished and become more balanced.

Despite markets largely expecting the decision, the BoE still tweaked its guidance, stating rates may continue to decline gradually and dropping the word “cautious.”

A few weeks after this decision, Chancellor Rachel Reeves will unveil the budget, where she is expected to announce significant tax increases—measures that could dampen growth and push inflation lower.

Reeves noted this week that current interest-rate levels constrain corporate borrowing and add to household financial burdens.

The BoE bases its forecasts and policy decisions on the fiscal settings as of March, so it did not factor in any anticipated budget measures.

Market take:
GBP/USD has been grinding higher on the 4-hour chart, but the MACD lines and histogram are fading above the zero line. While the UK’s 4% policy rate ranks among the highest in the G7 alongside the U.S., markets generally expect the Fed to ease policy sooner.