The Bank of England's Monetary Policy Committee has voted 5-4 to hold Bank Rate at 4%.
Four members voted to reduce Bank Rate by 0.25%, to 3.75%.
CPI inflation held steady at 3.8% in September, defying Bank of England forecasts of a slight uptick to 4%, but remains stubbornly above the government’s 2% target.
In its latest meeting, the Committee judged that inflation has now peaked at 3.8%.
If inflation begins to fall by the Committee's next meeting in December, industry experts predict we could see a cut to Bank Rate, with markets still pricing in another rate cut before the end of the year.
However, analysts agreed that this largely depends on the tax measures announced in this month's Autumn Budget.
Hugo Davies, chief capital officer and managing director of mortgages at Lendinvest, commented: "The MPC’s decision to bide its time and offer the same flimsy guidance, despite a backdrop of tax hikes and cooling inflation, is an act of self-sabotage against the UK economy. This slow-motion decline is actively punishing the housing market, keeping borrowing expensive for buyers and crippling development viability. With markets pricing in a 33bps cut by February, the MPC has only the high-stakes December decision left to meet that expectation. If they fail, their institutional slowness will be the direct cause of stifled activity, making the Chancellor's acute fiscal issue worse and translating into higher bond yields."
Kevin Shaw, national sales managing director at LRG, said: "No one will be surprised that the Bank of England has chosen to hold interest rates. With the Budget less than three weeks away, perhaps the Bank sees the need for some stability. And it would have been a brave move to change course in such a situation.
"There’s been so much speculation around the 26 November Budget that it’s taken on the status of a political event as well as a fiscal one. The last time we saw something of similar magnitude was the general election of July 2024. Back then the Bank also opted for caution despite the data signalling the need for a base rate reduction. It’s clearly sticking to the same approach.
"The Bank’s reasoning is sound. Inflation has remained stubbornly at 3.8% for two consecutive months – not something to panic about, but not yet at the target level at which to relax either. With so much depending on what the Chancellor unveils later this month, holding steady is the least disruptive choice.
"For the property market, today’s decision means continued stability for buyers and sellers.
"Perhaps on 18 December, when the Monetary Policy Committee next meets, with political uncertainty out of the way and inflation data moving in the right direction, we may see a reduction... well timed for Christmas."
Jeremy Leaf, north London estate agent and former RICS residential chairman, commented: “This time around the Bank had a more difficult decision to make than on previous occasions. Members of the interest-rate setting committee had to reconcile lower-than-expected inflation and wage growth with the likely impact of now-expected tax cuts in the Budget.
"The dangers of cutting rates further at this point could potentially reignite inflationary pressures which the Bank will be keen to avoid.
“As far as the housing market is concerned, activity has been in the doldrums for the past month or so since speculation about the Chancellor’s intentions intensified. However, the direction of travel for interest rates appears downwards which will give a boost to those sitting on the fence as well as others who are contemplating the end of fixed-rate mortgages at previously-agreed rock-bottom rates.”
Tim Parkes, CEO of RAW Capital Partners, added: “There had been some predictions that, with the economy experiencing such sluggish growth, the Bank of England might take the bold move to cut the base rate today. In reality, such a move always looked highly unlikely. Inflation, though seemingly under control, remains frustratingly sticky at close to 4%, while the uncertainty surrounding the upcoming Autumn Budget favours a more conservative approach from the MPC.
“The hope is that rate cuts will follow. Action has to be taken to boost spending and investment, in turn injecting fresh life into the economy. So, once the Budget is delivered, and if inflation does drop further, the base rate could resume its steady decline, which would undoubtedly provide a major boost to the property market.
“With economists expecting two or three base rate cuts over the next 12 months, there is a sense that many buyers and investors are sitting tight as they wait for the cost of borrowing to fall; once that happens, we may well see a flurry of action. Lenders and brokers must be poised to meet any uptick in demand, but for now the focus will undoubtedly remain on helping borrowers to understand potential implications of the Budget once the Chancellor makes her announcement in three weeks’ time.”
